The all-cash deal – the largest takeover ever by a German company – will create a firm that has control over more than a quarter of the world’s seeds and pesticides.
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Bayer AG, the company that invested aspirin and once trademarked “Heroin” as a cough medicine, wooed Monsanto’s board with a $US66 billion ($88 billion) offer on Wednesday night Australian time.
In U.S. trading, shares of both companies closed up 0.6 percent, with Bayer at $104.85 and Monsanto at $106.76.
And environmental groups geared up for a fight. The company has been criticized world-wide for the influence of company’s products, including genetically modified seeds and chemical herbicides, has on the environment and public health.
“This mega corporation will be doing its best to force damaging pesticides and GM seeds into our countryside”, campaigner Adrian Bebb said in a statement. The $66 billion figure put on the deal by Bayer includes net debt; the equity value is $57 billion, according to slides for an investment analyst conference call. In August, Senator Charles Grassley (R., Iowa) set a hearing for September 20 to question seed-industry executives and experts. Bayer and Monsanto would be two of the remaining agribusiness giants to merge, and regulators are likely to scrutinize whether the deal could raise prices that farmers pay for seeds and chemicals. In a September 14 conference call with analysts, Baumann said the companies already have received “encouraging feedback” from regulatory agencies.
Monsanto chairman and CEO Hugh Grant said the announcement was a testament to everything the company had achieved.
“I think at the end of the day it’s about opportunity”. DuPont (DD) and Dow Chemical (DOW) late past year unveiled plans to merge. “This combination with Bayer will deliver just that – an innovation engine that pairs Bayer’s crop protection portfolio with our world-class seeds and traits and digital agriculture tools to help growers overcome the obstacles of tomorrow”.
That was turned down by Monsanto, which deemed the price inadequate.
The two companies announced the deal on Wednesday.
It would be the biggest yet acquisition of 2016 once approved by regulators in the U.S., Germany and the European Union but the deal between the corporate giants that will hand over more than 25 percent of the world’s seeds and pesticides to Bayer is likely to be heavily scrutinized by government regulators across the globe.
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But Bayer said that it expects synergy savings from the merger will allow it to add $1.5 billion to its underlying profit as measured by EBITDA within three years. Monsanto posted total sales of $15 billion in 2015.
