Bayer, Monsanto Agree to Merge in $66 Billion DealBy
In first large-scale acquisition as a pure-play life-sciences company, Bayer has agreed to acquire Monsanto, an agrochemical and seed company, for $128 per share in a deal valued at approximately $66 billion (inclusive of assuming debt). The merger agreement has been unanimously approved by Monsanto’s Board of Directors, Bayer’s Board of Management, and Bayer’s Supervisory Board and ends a four-month effort by Bayer to come to terms with Monsanto for the acquisition.
Earlier this month, Bayer confirmed that it was in “advanced negotiations” with, Monsanto with a move to increase it latest offer. In July 2016, Bayer upped its original offer of $122 per share, or $62 billion, which it had made in May 2016, to $125 per share, or approximately $65 billion; both times Monsanto had rejected the proposal.
Bayer’s move to acquire Monsanto is its first large-scale acquisition effort since becoming a pure-play life-sciences company with a focus on pharmaceuticals, crop science, and consumer healthcare with projected 2016 sales in its life-sciences business of approximately EUR 35 billion ($40 billion). 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. Bayer 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 decision to focus on life sciences followed its decision to spin off its material-science business. 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.
Pro forma sales of the combined agricultural business is EUR 23 billion ($26 billion) in calendar year 2015, which would make it the second largest segment in Bayer behind pharmaceuticals. In 2015, Bayer posted overall life-sciences pro forma revenues of EUR 34.34 billion ($38.64 billion). Pharmaceuticals accounted for EUR 15.31 billion ($17.23 billion), crop science EUR 10.37 billion ($11.67 billion), consumer health EUR 6.08 billion ($6.84 billion), and animal health EUR 1.49 billion ($1.68 billion).
The acquisition is subject to customary closing conditions, including Monsanto shareholder approval of the merger agreement, and receipt of required regulatory approvals. Closing is expected by the end of 2017. Bayer has committed to a $2-billion reverse antitrust break fee to reaffirm its confidence that it will obtain the necessary regulatory approvals.Bayer has confirmed sales and cost synergies assumptions in due diligence and expects total synergies of approximately $1.5 billion after year three of closing plus additional synergies from integrated solutions in future years.
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 an important presence in Durham, North Carolina as well as other locations throughout the US and around the world. The Digital Farming activities for the combined business will be based in San Francisco, California.