Bayer Clinches Monsanto Takeover for $66B

Creve Coeur based Monsanto has agreed to be bought out by Bayer AG for $128 per share in an all-cash deal totaling almost $66 billion, the companies announced Wednesday morning.

Consumers could benefit from more-affordable and healthier food options as well as the companies’ using their expertise to help farmers limit their chemical use and environmental impact, company executives said Wednesday after the all-cash deal was announced.

Bayer’s competitors are merging, so not doing this deal would mean having a competitive disadvantage.

It comes amid record harvests driving crop prices to painfully low levels for many farmers.

But the proposed merger will likely face an intense and lengthy regulatory process in the United States, Canada, Brazil, the European Union and elsewhere.

Liam Condon, the head of Bayer’s crop science division, said the company was “pretty confident” that the deal would be approved by regulators because both companies have “highly complementary” product lines and geographic offerings.

“If the deal is successful, it’ll make the new corporation the biggest seed maker and pesticide company in the world – and it will have nearly total control of the most important aspects of our food supply”.

What the newly-formed company would be named is unclear. Bayer has agreed to pay Monsanto a $2 billion breakup fee if the deal is thwarted.

Now the merger of the German company Bayer and St. Louis based Monsanto goes under the scrutiny of regulators.

The details confirm what a source close to the matter told Reuters earlier. American Soybean Association President Richard Wilkins said in a statement, “ASA intends to closely analyze the potential impacts of this proposed merger on soybean farmers to provide comments to the companies and USA regulatory authorities that must approve any acquisition, including the Justice Department”. Based on Monsanto’s closing share price on 9 May 2016, the day before Bayer’s first written proposal to Monsanto, the offer represents a premium of 44% to that price. The equity component of approximately Dollars 19 billion is expected to be raised through an issuance of mandatory convertible bonds and through a rights issue with subscription rights. Bayer’s share of the US cotton seed market sits at 38.5 percent, while Monsanto is 31.2 percent, according to data compiled by the Konkurrenz Group. Monsanto’s were up 0.6 per cent at $106.76. Bayer has a smaller seeds business but is mainly in the pest and disease product side of the agri-chemical market, including seed treatments, while Monsanto’s chemicals were more in the herbicide and weed control side of the market. The German company aims to create a one-stop shop for seeds, crop chemicals and computer-aided services to farmers.

That was also the idea behind Monsanto’s swoop on Syngenta previous year, which the Swiss company fended off, only to agree later to a takeover by China’s state-owned ChemChina.

“I think a larger, more bureaucratic firm may be slower to respond in innovation, and we need progress in our seeds and crop protection”. “This represents a major step forward for our Crop Science business and reinforces Bayer’s leadership position as a global innovation driven Life Science company with leadership positions in its core segments, delivering substantial value to shareholders, our customers, employees and society at large”, said Werner Baumann, CEO of Bayer AG (pictured left, with Hugh Grant, Chairman and Chief Executive Officer of Monsanto). The all-cash deal is valued at about US$128 a share, making it the weightiest all-cash buyout in history, beating the US$60 billion deal between brewers Anheuser-Busch and InBev in 2008. With that in mind and the fact that Monsanto-Bayer deal will be scrutinized by antitrust authorities of more than 25 countries across the globe, whether the deal would complete is at best a coin-flip.