Bayer and Monsanto today announced that they signed a definitive merger agreement under which Bayer will acquire Monsanto for $128 (U.S.) per share in an all-cash transaction. That puts the total buyout price at $65 billion U.S., including $9.3 billion in Monsanto debt that Bayer will cover.
Monsanto’s Board of Directors, Bayer’s Board of Management and Bayer’s Supervisory Board have unanimously approved the agreement.
Based on Monsanto’s closing share price on May 9, 2016, the day before Bayer’s first written proposal to Monsanto, the offer represents a premium of 44% to that price.
The agreement, though, still requires regulatory approval. Analysts at Bernstein Research said this week that the deal only has a 50% chance of gaining all the necessary nods from regulatory on both sides of the Atlantic Ocean. What the analysts called “political pushback” could add delays and complications to bringing Monsanto into Bayer’s stable.
Bumps in the road include farmer distrust of supplier consolidation and also misgivings in the U.S. about Monsanto shifting to foreign ownership.
Regulators could well pressure the companies to spin off certain units or product lines to avoid hints of monopoly ownership.
Bayer has committed a $2 billion settlemen payment to Monsanto if the merger falls through.
If the buyout does become a reality, Bayer’s seeds and traits operations and North American headquarters will center in St. Louis, Missouri, where Monsanto is based. Bayer’s global crop protection operations will be headquartered in Monheim, Germany. The company will continue a presence in Durham, North Carolina, as well.
“We are pleased to announce the combination of our two great organizations. 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,” saidWerner Baumann, CEO of Bayer AG.
Hugh Grant, Chairman and Chief Executive Officer of Monsanto, sayd the agreement “is a testament to everything we’ve achieved and the value that we have created for our stakeholders at Monsanto…(T)his combination with Bayer represents the most compelling value for our shareowners, with the most certainty through the all-cash consideration.”
Pro forma sales of the combined agricultural business amounted to 23 billion Euros ($25.8 billion U.S.), according to today’s announcement. Bayer expects that the combined operations will produce “synergies” amounting to $1.5 billion after the third year the merger.
Bayer intends to finance the transaction with a combination of debt and equity. The equity component of approximately $19 billion is expected to be raised through an issuance of mandatory convertible bonds and through a rights issue with subscription rights. Bridge financing for USD 57 billion is committed by BofA Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan.