The German chemicals multinational Bayer said on Wednesday it had signed a US$66 billion takeover deal with the United States seeds and pesticides firm Monsanto.
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Sources say the deal terms may include a significant breakup fee, which one source pegs around $3 billion that Bayer would pay to Monsanto if the transaction falls through due to USA and/or European anti-trust concerns that analysts say will be raised as regulators take a closer look at the combined companies.
Although Monsanto has accepted the offer, its shareholders will still need to approve the buyout, and Bayer has promised $2 billion to the biotechnology company should Bayer fail to get the necessary regulatory clearance. Anti-trust regulators are also expected to forensically scrutinize the tie-up to determine whether the new business would gain a market-dominating position in any one part of their business. Bayer indicated its confidence the deal would go through by agreeing to pay a $2 billion fee if it does not.
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 a presence in Durham, North Carolina, as well as many other locations throughout the USA and around the world.
Baumann said the North American headquarters of the combined company will be located in St. Louis, but that the new concern will continue to have a number of assets in the Durham, N.C. area.
Bayer and Monsanto were in talks to sound out ways to combine their businesses as early as March, which culminated in Bayer’s initial $122 per-share takeover proposal in May.
“$128 per share in all-cash transaction, represents 44 per cent premium to Monsanto shareholders and an aggregate value of $66 billion”, the statement said.
The 58.8-billion-euro deal marks the largest-ever takeover by a German firm and creates a new behemoth in the agrochemical industry.
The announced merger would be the biggest deal of 2016 and after Monsanto rejected two previous lower offers by Bayer. For years environmental activists have railed against the business practices of Monsanto, a leading practitioner of genetic modification based in St Louis in the mid-western USA state of Missouri.
In the pre-market, Monday is now trading at $106.37, up $0.27 or 0.25 percent. Monsanto’s were up 0.2 percent at $106.3 in premarket trade.
That is not possible with conventional farming and production methods, companies like Monsanto argue. The combined company will be well positioned to participate in the agricultural industry with significant long-term growth potential.
At a recent Deutsche Bank (NYSE:DB) conference in Berlin Baumann said he was “very comfortable” with financing of the Monsanto acquisition as FOX Business reported.
REVENUE: 46.3 billion euros, or $52 billion, in the year ending December 2015.
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Profit sank from 1.45 billion dollars to 1.06 billion dollars.
