Germany-based life science company Bayer (BAYRY) and USA seed giant Monsanto (MON) announced a merger agreement on Tuesday morning worth $66 billion. The US company has rejected that proposal, as well as further bids of Bayer.
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Bayer repeatedly increased its offer to Monsanto since its first $122-per-share bid, but the U.S. firm had until now held out for more cash. Well, that’s not generally the case when a company is acquired at such a huge premium. While Bayer has its efforts and product line in crop protection. As the Two-Way has reported, “the company is a German pharmaceutical and chemical powerhouse with 102,000 employees and $41 billion in revenue past year”.
Reuters reports that Bernstein Research analysts give the deal a 50/50 chance of being approved by regulators. For the same reasons, we didn’t see any rally, which may trigger when both the companies cover some ground towards completing the merger.
“This represents a major step forward for our crop science business and reinforces Bayer’s leadership position as a global innovation-driven life science company with leadership positions in its core segments”, Bayer CEO Werner Baumann, who had pushed the takeover since taking office May 1, said Wednesday in a news release.
Announcing the agreement, negotiations for which began in May 2016, Hugh Grant, chairman and chief executive officer of Monsanto, said the combined might of the two companies would deliver solutions for a new era in agriculture.
The deal, subject to regulatory approvals of both countries, is expected to create an agricultural powerhouse that would bring together both companies’ innovation capabilities – Bayer’s crop protection portfolio and Monsanto’s expertise in seeds and traits and digital agriculture. Monsanto shares were up 1.6% ahead of the United States market open. The deal with Monsanto, known for its seed business and the weed killer glyphosate, would mean Bayer commands over a quarter of the combined world market for seeds and pesticides.
“Bayer and Monsanto on Wednesday signed a merger agreement to farm”, priced at $ 128 per share (114 euros) in cash, Bayer announced in a statement.
Bayer first made a play for Monsanto back in mid-May, an offer that was quickly rebuffed by Monsanto.
Its equity components of approximately $19 billion are to be raised through issuance of convertible bonds and a rights offer.
Bayer said BofA Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan had committed to providing the bridge financing.
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The combined business would locate the global seeds and traits and the North American commercial headquarters in St Louis, Missouri while the main global crop protection and crop science facility would be in Monheim, Germany. Bayer will pay about $4 billion more than its initial offer and will also give Monsanto $2 billion if the deal is blocked by regulators. Bayer’s legal advisers are Sullivan & Cromwell LLP and Allen & Overy LLP.
