Bayer’s move to combine its crop chemicals business, the world’s second largest after Syn-German giant pays 44% premium for United States firm in largest ever all-cash deal genta AG, with Monsanto’s industry leading seeds business, is the latest in a series of major tie-ups in the agrochemicals sector.
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The WSJ also pointed out Bayer CEO Werner Baumann’s statement on an investor call that the companies have had “some initial contacts with regulatory agencies describing what this combination would be about”, after the agreement was announced.
Bayer, based in Leverkusen, said the companies’ combined agriculture business would keep its seeds business and North American business headquarters in St. Louis, where Monsanto is now based.
In a deal that publicly began months ago, it’s now official: Bayer is buying Monsanto for a whopping $66 billion ($128 per share). Well, that’s not generally the case when a company is acquired at such a huge premium.
Even though the pact between Monsanto and Bayer would turn out to be the most valued deal of 2016, it is still far from being executed. Several factors will be weighed including what it might mean to relocate Monstanto from USA soil to Germany, the home of Bayer. However, the company failed to acquire Syngenta and also could not establish a concrete deal with the German chemical company, BASF. The combined companies will have an annual pro-forma R&D budget of about €2.5 billion. For the same reasons, we didn’t see any rally, which may trigger when both the companies cover some ground towards completing the merger. Shares of Monsanto, which are up 8 percent this year, rose 66 cents to close Wednesday at $106.76. with Bayer at $104.85 and Monsanto. Monsanto is a leader in seeds and traits, while Bayer has a stronger presence in crop-protection chemicals. Monsanto’s shareholders must approve the deal and that is not expected to happen until next year. 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.
Bayer is to fund this transaction, which values Monsanto shares at over $56 billion, with both equity and debt.
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Bayer and Monsanto executives wouldn’t discuss the fate of the Monsanto name, but said the combined company’s seeds and North American business will have headquarters at Monsanto’s St. Louis base. It hopes to combine this seed production strength with its own prominence in the pesticide business as the global agriculture market struggles with widespread layoffs and cutbacks on research projects.
