Bayer has offered to acquire Monsanto for $62 billion cash, in a deal that would create an agricultural biotech colossus—but has raised concerns among investors.
Bayer’s disclosure comes 4 days after the German-based life sciences giant said it met with Monsanto executives “to privately discuss a negotiated acquisition of Monsanto.”
Today Bayer detailed its proposal, which represents a 37% premium over Monsanto’s closing share price of $89.03 on May 9, the day before Bayer made its offer.
Monsanto issued no immediate comment today. On May 18, the company stated that its board was reviewing the “unsolicited, nonbinding” Bayer offer, and that it would not comment further until completion of that review.
“The disclosed price is at top end of the limit and just about works out. Should it rise any further, which appears probable, the takeover will become increasingly unattractive,” Markus Manns, a fund manager with Union Investment whose investment responsibilities include Bayer shares, said in a note to investors reported by Bloomberg News and Reuters.
The combined company, Bayer said, would bring together Monsanto’s expertise in seeds and traits with Bayer’s know-how in crop protection, while combining those operations as well as the biologics and digital farming knowledge of both companies.
The Bayer–Monsanto combo would have its global Seeds and Traits business and North American commercial headquarters in St. Louis, as well as its global Crop Protection and divisional Crop Science headquarters in Monheim, Germany. There would also be an unspecified “important presence” in Durham, NC and elsewhere in the U.S. and worldwide.
Digital farming for the combined business would be based near San Francisco. Within the Bay Area, Bayer has a biotech manufacturing facility in Berkeley and an R&D facility or “U.S. Innovation Center” at the Mission Bay campus in San Francisco.
A combined Bayer–Monsanto would benefit from a broader product portfolio and deeper R&D pipeline, the would-be buyer said, while expanding Bayer’s longtime presence in the Americas and its position in Europe and Asia/Pacific.
“We have long respected Monsanto’s business and share their vision to create an integrated business that we believe is capable of generating substantial value for both companies’ shareholders,” Bayer CEO Werner Baumann said in a statement. “Together we would draw on the collective expertise of both companies to build a leading agriculture player with exceptional innovation capabilities to the benefit of farmers, consumers, our employees, and the communities in which we operate.”
During a conference call with reporters, according to news reports this morning, Baumann criticized the concern raised by some investors as describing criticism from some investors as “an uneducated reaction in the media.”
Equinet analyst Marietta Miemietz, who has a “buy” rating on Bayer stock, told Reuters the extra debt from a Monsanto acquisition could limit Bayer's ability to invest in its healthcare business. That argument was rejected during the conference call by Baumann, who said no asset sales were planned: “We are not feeding Peter by starving Paul here.”
Bayer said a Monsanto acquisition would add to its core earnings per share “by a mid-single-digit percentage” in the first full year after closing and by a double-digit percentage thereafter.
However, Bayer acknowledged that it expects to generate annual cost reductions or “synergies” of approximately $1.5 billion after the third full year following completion of the deal.
The prospect of a Bayer–Monsanto combination comes at a time of consolidation in agricultural biotechnology, with Dow Chemical and DuPont in December announcing plans for a $130 billion merger and with ChemChina in the process of acquiring Syngenta for $43 billion after a rejection of an approximately $46 billion offer by Monsanto.