Bayer Makes $62 Billion Proposal to Acquire Monsanto in Life Sciences Power PlayBy
In a move to fortify its position as a pure-play life sciences company, Bayer has confirmed that it has made a proposal to acquire Monsanto in an all-cash offer for $122 per share or an aggregate value of $62 billion. The move would strengthen the company’s crop science business, one of three main segments for Bayers, which also includes its pharmaceuticals and consumer healthcare businesses.
The deal would bring together the companines’ seeds & traits, crop protection, biologics, and digital farming platforms. Specifically, the combined business would benefit from Monsanto's position in seeds & traits and Bayer's broad crop protection product line across a range of indications and crops. The combination would also be complementary from a geographic perspective by expanding Bayer's presence in the Americas and its position in Europe and Asia/Pacific.
Bayer’s decision to acquire Monsanto follows the company’s decision to position itself as a pure-play life sciences company. Bayer’s former MaterialScience subgroup, renamed Covestro, became legally and economically independent on September 1, 2015, and Covestro AG was floated on the stock market in October 2015. Bayer currently still owns around 69% of Covestro. Bayer then took on a new corporate structure in January 2016 with three divisions: pharmaceuticals, consumer health, and crop science, and a separate business unit, animal health. Bayer’s focus on life sciences is being led by Werner Baumann, who became chairman of the board of management of Bayer AG on May 1, 2016, succeeding Marijn Dekkers.
Prior to its proposal to acquire Monsanto at its annual stockholder meeting in late April, Bayer estimated 2016 sales in its life sciences business of approximately EUR 35 billion ($40 billion) .With the new structure, Bayer’s pharmaceuticals business is now the largest piece of the new Bayer, accounting for nearly 45% of the company’s total life sciences’ revenues on a pro forma basis in 2015, followed by crop science (30%), consumer health (18%), and its animal health business unit (4%). In 2015, Bayer posted overall life sciences pro forma revenues of EUR 34.34 billion ($38.72 billion). Pharmaceuticals accounted for EUR 15.31 billion ($17.26 billion), crop science EUR 10.37 billion ($11.69 billion), consumer health EUR 6.08 billion ($6.85 billion), and animal health EUR 1.49 billion ($1.68 billion).
With the proposed acquisition of Monsanto, Bayer is signaling its strategic interest to build the crop science/agricultural piece of its life-sciences businesses. Under the proposed transaction, the global Seeds & Traits and North American commercial headquarters would be located in St. Louis, Missouri, its global Crop Protection and divisional Crop Science headquarters in Monheim, Germany, and the combined company would have a presence in Durham, North Carolina, as well as many other locations throughout the US and around the world. Digital Farming for the combined business would be based near San Francisco, California.
Bayer's Board of Management and Supervisory Board unanimously approved the proposal and are “fully committed to pursuing the transaction,” said Bayer in a press statement. Bayer said it is prepared to proceed immediately to due diligence and negotiations and to quickly agree to a transaction. The transaction will be subject to customary closing conditions.
For its part, Monsanto confirmed that it had received an unsolicited proposal from Bayer and is evaluating the proposal. “Monsanto Company disclosed that it has received an unsolicited, non-binding proposal from Bayer AG for a potential acquisition of Monsanto, subject to due diligence, regulatory approvals and other conditions,” said the company in a statement. :The Board of Directors of Monsanto is reviewing the proposal, in consultation with its financial and legal advisors. Monsanto will have no further comment until its Board of Directors has completed its review. There is no assurance that any transaction will be entered into or consummated, or on what terms.”