Monsanto Rejects Bayer’s $62 Billion Acquisition Proposal; Open To Talks

Monsanto Company has rejected Bayer AG’s proposal to acquire Monsanto for $122 per share or an aggregate value of $62 billion. Bayer’s move to acquire Monsanto is the first large-scale acquisition for Bayer since its strategic decision to be a pure-play life sciences company with three main business areas: pharmaceuticals, crop science, and consumer healthcare.

Bayer’s decision to acquire Monsanto follows the company’s move 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.

In rejecting the offer, Monsanto left the door open for further discussions with Bayer. “The Board of Directors unanimously views the Bayer AG proposal as incomplete and financially inadequate, but is open to continued and constructive conversations to assess whether a transaction in the best interest of Monsanto shareowners can be achieved,” said Monsanto in a a company statement.

Bayer said it was open to further discussion. “We are pleased that Monsanto's Board shares our belief in the substantial benefits an integrated strategy could provide to growers and broader society,” said Werner Baumann, CEO of Bayer AG, in a company statement. “We are confident that we can address any potential financing or regulatory matters related to the transaction. Bayer remains committed to working together to complete this mutually compelling transaction.”

The deal would bring together the companies’ 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.

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.

Source: Monsanto and Bayer

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