While Monsanto’s seed-focused business doesn’t greatly overlap Bayer’s pesticide-heavy ag franchise, the marriage of these farm supplier giants will test the tolerance of farmers and politicians already tiring of multibillion-dollar deals to merge other top players in the $100 billion global market for seeds and pesticides, while fertilizer producers also consolidate.
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As sources throughout the industry and beyond debate the impending merger and its impact, both Bayer and Monsanto asserted that the merger will create significant value with expected synergies from the companies to reach $1.5 billion United States dollars after three years. Bayer has agreed to pay Monsanto a $2 billion breakup fee if the transaction fails to go through. Combined with the debt which Bayer will also acquire through the deal, CNN is calling the agreement the biggest takeover of the year.
It comes as the agribusiness sector has been facing pressure for consolidation amid intense competition in grain exports and a souring global farm economy.
Bayer said it was offering a 44 percent premium to Monsanto’s share price on May 9, the day before it made its first written proposal.
The all-cash agreement will see Bayer acquire the business at $128 per share (£97). The per share price of all cash is 21% above the closing price of Monsanto on Tuesday.
Both the companies Monsanto and Bayer have presence in India with the USA firm selling genetically modified (GM) cotton seeds in the country for more than a decade.
The firm has been courting the U.S. crops and seeds specialist for months, and the German company previously offered $125 per share. For example, a merger between DuPont and Dow Chemical that was agreed upon in December of previous year is unlikely to close until early 2017 after the European Commission started an investigation. To satisfy antitrust concerns, St. Louis-based Monsanto agreed at the time to sell its Stoneville Pedigree Seed unit, which had 12 percent of US cottonseed sales, to Bayer for $310 million. Wall Street, however, isn’t so sure given the unexpected rejections of some mergers such as the Staples-Office Depot deal.
The two have been in talks since early May. Monsanto produces seeds for crops like alfalfa, canola, corn, cotton, sorghum, soybeans, sugarbeets, and wheat.
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Bridge financing for Dollars 57 billion is committed by BofA Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan, it added. Advisors to the TransactionBofA Merrill Lynch and Credit Suisse are acting as lead financial advisors and structuring banks to Bayer in addition to providing committed financing for the transaction; Rothschild has been retained as an additional financial advisor to Bayer.
