German multinational Bayer and USA -based Monsanto Company (NYSE:MON) today announced the signing of a definitive merger agreement, in a deal that would form the world’s biggest seeds and pesticides company.
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Bayer’s 20-strong board signed off the merger after Monsanto’s executives, who include Scottish chief executive Hugh Grant, agreed to an improved $128-a-share offer.
The Bayer-Monsanto deal will be the largest ever involving a German buyer, beating Daimler’s tie-up with Chrysler in 1998, which valued the US carmaker at more than $40 billion.
The combined agriculture business will have its global seeds and traits and North American commercial headquarters in St Louis, Missouri, its global crop protection and overall crop science headquarters in Monheim, Germany, and an important presence in Durham, North Carolina, as well as many other locations throughout the United States and around the world. The combined company also will keep an important presence in Durham, N.C., and other sites around the world, the statement said.
“US and European Union regulators should recognize the unique threats posed by a Bayer-Monsanto merger and move swiftly to reject this proposal”.
It is the largest ever takeover by a German company.
Taking advantage of a decline in Monsanto’s share price, Bayer, based in the industrial city of Leverkusen, first made an unsolicited offer of US$122 a share in May, and then in July bumped that to US$125.
The new offer would value Monsanto at $56.5 billion.
Monsanto shares in the US were flat in premarket trading at around $106.
However, competition authorities are likely to scrutinize the tie-up closely, and some of Bayer’s own shareholders have been critical of a takeover plan which they say is too expensive and risks neglecting the company’s pharmaceutical business.
“The deal will face a number of hurdles, principally for US national security issues such as production close to military bases, and from farmers who will see their choice of products limited further”, she said in emailed comments.
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Tensions have escalated further because global crop prices have fallen for three straight years, squeezing profits and forcing the seed and agriculture industries to cut costs and trim their workforces. While E.I. du Pont de Nemours and Company (DD – Analyst Report) and The Dow Chemical Company (DOW – Analyst Report) inked a $130 million merger deal in 2015, Syngenta AG (SYT – Analyst Report) agreed to be bought by ChemChina for $43 billion in Feb 2016. Bayer had already developed seeds for rice, cotton, and oilseed. Bayer’s legal advisors are Sullivan & Cromwell LLP (M&A) and Allen & Overy LLP (Financing). Monsato used Morgan Stanley and Ducera Partners.
