As of 2015, Monsanto’s Deltapine brand had 31 percent of the market while Bayer’s Fibermax and Stoneville brands combined for 39 percent, according to a U.S. Department of Agriculture report published past year.
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German drug and farm chemical company Bayer AG says it has signed a deal to acquire seed and weed-killer company Monsanto for $66 billion in cash.
Many of Bayer’s shareholders are not pleased with the deal, saying the merger is too expensive and could end up neglecting the pharmaceutical end of the company. The deal is valued at $128 per share.
Mr. Baumann and Mr. Grant said that they haven’t yet determined whether Bayer will continue to use Monsanto’s brand name if the deal succeeds, though Mr. Grant said it is something about which Monsanto is willing to be “flexible”.
The deal must still get the nod from Monsanto shareholders and regulators, who in the USA have recently rejected a pair of megadeals in the health sector. Bayer has agreed to pay Monsanto a $2 billion breakup fee if the deal is thwarted.
Yahoo Finance reports that Monsanto was trading 1.8 percent higher in the pre-market trading session at 5:30 a.m.
Shares of Monsanto rose 0.6 percent to $106.70 as of 9:52 a.m.in NY.
Hugh Grant, chairman and CEO of Monsanto, called the deal a “testament to everything we’ve achieved and the value that we have created for our shareholders”.
The combination also will bring together both companies’ innovation capabilities and R&D technology platforms, with an annual pro-forma R&D budget of approximately €2.5 billion. Both acquisitions are now being reviewed by antitrust regulators.
Justice Department investigators have in recent years launched probes into “possible anti-competitive practices” in America’s Monsanto-led seed industry, though a formal investigation was closed in 2012 without pursuing charges.
“The whole agricultural industry around the world is basically going through a transformation”. Recently, Monsanto’s rival Syngenta was acquired by China’s state-owned firm ChemChina. DuPont (DD) and Dow Chemical (DOW) late past year unveiled plans to merge.
In the combined agriculture business, Bayer plans to house its global seeds and North American commercial headquarters in St. Louis and base its global crop protection and overall crop science headquarters in Monheim, Germany.
The German company is aiming to create a one-stop shop for seeds, crop chemicals and computer-aided services to farmers.
The deal, which is reported to be the largest all-cash transaction on record, marks a major consolidation in global seed business.
“Clearly Bayer will realise cost savings from the acquisition, but they have had to pay an enormous price for Monsanto at a 45% premium to the previously undisturbed share price”. The equity component of about $19 billion will be raised through an issuance of mandatory convertible bonds as well as a rights offer.
It also said BofA Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan had committed to providing $57 billion of bridge financing and that it was targeting an investment grade credit rating after completion of the deal.
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Bayer and Monsanto were in talks to sound out ways to combine their businesses as early as March, which culminated in Bayer’s initial $122 per-share takeover proposal in May. Monsanto’s base in St. Louis will become the company’s global hub for seeds. Bayer’s legal advisers are Sullivan & Cromwell and Allen & Overy.
