Germany’s Bayer offers $62b cash to acquire Monsanto

Berlin: Bayer made an unsolicited $62 billion all-cash offer to acquire Monsanto and create the world’s biggest supplier of farm chemicals and genetically modified seeds, disclosing the terms of its bid amid investors’ growing concern that it might overpay.
Bayer offered $122 per share in an all-cash bid in a May 10 written proposal, the Leverkusen-based company said in a statement on Monday. That’s a 37 per cent premium to Monsanto’s May 9 closing price. The payment would be funded with a combination of debt and equity, with about 25 per cent of the enterprise value financed from selling shares to existing investors.
Chief Executive Officer Werner Baumann, after less than a month at the helm, is attempting to pull off the biggest corporate takeover ever by a German company. Buying St. Louis-based Monsanto would give Bayer the world’s largest seed supplier and a pioneer of crop biotechnology. The kind of genetically modified seeds that Monsanto started to sell two decades ago now account for the majority of corn and soybeans grown in the US.
‘Uneducated reaction’
Bayer shares fell by the most in seven years when it confirmed having made an offer, without disclosing the financial details, on Thursday. The stock is down 23 per cent this year. Monsanto hasn’t responded to the offer publicly, beyond saying that it was reviewing the terms.
"What we saw last week was an uneducated reaction in the media and the press because we did not communicate the details of our proposal,” Baumann said on a conference call on Monday. "We are utterly convinced of the rationale” of the proposal.
The deal will add to core earnings per share by a mid-single-digit percentage in the first full year after completion, and a double-digit percentage thereafter, Bayer said. The German company also expects earnings to be bolstered by savings of about $1.5 billion from the fourth year following the deal.
Role reversal
The offer marks a reversal of roles for Monsanto. The company previously sought to buy Swiss pesticide maker Syngenta, but had to abandon the $43.7 billion bid in August after the other company refused to agree to a deal.
The crop and seed industry is being reshaped by a series of large transactions. China National Chemical Corp. agreed in February to acquire Syngenta for about $43 billion, months after Monsanto abandoned its own bid. Meanwhile DuPont and Dow Chemical plan to merge and then carve out a new crop-science unit.
Bank of America and Credit Suisse Group are the financing banks for Bayer, while Rothschild has been retained as an additional financial adviser.