19 September 2016

Bayer agrees acquisition of seed producer Monsanto


German chemical conglomerate Bayer last week inked a mega deal to purchase Monsanto, a manufacturer of crop seeds and herbicides. The acquiror will pay USD 128 per share, representing a 21 per cent premium over Monsanto’s close of USD 106 on 13th September 2016, the last trading day prior to the announcement. Including debt, the takeover can be valued at a whopping USD 66,000 million, making it the tenth largest deal announced since 2007, according to Zephyr, the M&A database published by Bureau van Dijk.

Bank of America, Credit Suisse, Goldman Sachs, HSBC and JP Morgan will provide a debt facility worth USD 57,000 million to finance the transaction, which will close by the end of next year, pending regulatory and shareholder approvals.

In May this year, the acquiror proposed to purchase Monsanto for USD 122 per share, which fell short of the latter’s expectations. Bayer subsequently upped its bid price to USD 125 apiece, though it still failed to satisfy Monsanto’s board of directors, who described the offer as “financially inadequate and insufficient to ensure deal certainty.” In hopes of striking a better deal, Monsanto then went on to revive talks with chemical manufacturer BASF, which previously vied with Bayer for the target.  Determined, Bayer last month even reportedly considered launching a hostile bid to absorb Monsanto if consensus still could not be reached. However, after months of intense negotiations, Monsanto finally agreed to Bayer’s current offer of USD 128 apiece last week.

The board approval came after the Committee on Foreign Investment in the US, an inter-agency commission that reviews foreign investments for national security, cleared China National Chemical’s USD 43,000 million acquisition of seed producer Syngenta.

With Monsanto’s businesses soon becoming part of Bayer’s portfolio, the combined entity is set to be the largest seeds and pesticides provider by sales, the Wall Street Journal reported. Both parties, however, may have to trim some overlapping businesses to appease antitrust regulators, the newspaper noted. According to Bloomberg, agricultural sciences will replace Bayer’s healthcare segment as its largest business upon completion of the deal, enabling the buyer to tap into the increasing demand for crops as the world’s population grows.

Hugh Grant, chief executive of Monsanto, believes that the future of agriculture will require new, sustainable solutions and technologies to allow farmers to grow more with fewer resources.  Commenting on the merger, he stated: “This combination with Bayer will deliver just that – an innovation engine that pairs Bayer’s crop protection portfolio with our world-class seeds and traits and digital agriculture tools to help growers overcome the obstacles of tomorrow.”

Bayer has appointed Bank of America, Credit Suisse and Rothschild as financial advisors to the deal, while Ducera Partners and Morgan Stanley are assisting Monsanto.

© Zephyr