Under the terms of the agreement, Bayer has offered a $2bn break fee, should the deal not be completed. It is buying Monsanto, the biotech pioneer based in St. Louis. Broadly speaking, that makes sense – Bayer is paying away all the benefits of the deal, and then some, to Monsanto shareholders.
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The companies stated in a press release that the per share all-cash transaction is a 44 percent premium to shareholders, based on Monsanto’s closing share price as reported on the day before Bayer’s first written proposal on May 9, 2016.
Bayer boss Werner Baumann said the deal “reinforces Bayer’s leadership position as a global innovation driven life science company”.
The firm has been courting the USA crops and seeds specialist for months, and the German company previously offered $125 per share.
Its equity components of approximately $19 billion are to be raised through issuance of convertible bonds and a rights offer.
In crop chemicals like herbicides, the companies created by the Syngenta-ChemChina and Bayer-Monsanto mergers would control more than half the market, according to 2015 data compiled by Bloomberg.
Bayer, which is strongest in Asia and Europe, is set to gain from Monsanto’s expertise in agriculture and seeds.
The proposed deal is likely to spur US regulators to demand the sale of some cottonseed assets to alleviate concerns that the deal could hurt competition in one of the country’s largest row crops.
That was also the idea behind Monsanto’s swoop on Syngenta AG past year.
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”. This is the most expensive acquisition ever paid by a German group. At 1.15 pm, shares of Monsanto were trading 1.41 per cent up at Rs 2608.45.
Pharma giant Bayer has acquired St. Louis-based Monsanto. It also agreed to divest its smaller NexGen cottonseed brand.
Monsanto agreed to sell itself to Bayer for $128 per share in cash, yet its shares were hovering around $107 on Wednesday, reflecting the significant regulatory uncertainty surrounding the deal in the minds of investors.
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Johnson went on to say consolidations especially hurt farmers when commodity process are low but input prices remain high.
