German drug and chemicals company Bayer AG announced on Monday that it has made a $62 billion offer to buy US-based crops and seeds specialist Monsanto. The proposed combination would create a giant seed and farm chemical company with a strong presence in the US, Europe and Asia.
Bayer said the all-cash offer values shares of Monsanto at $122 each.
Unhappy Investors
Both companies are familiar brands on farms around the globe. Bayer’s farm business produces seeds as well as compounds to kill weeds, bugs and fungus. The inventor of aspirin and maker of Yasmin birth control pills, Bayer is more diversified than Monsanto. A deal with Monsanto could therefore lead to a breakup of the group, according to analysts.
Monsanto has some 20,000 employees and produces seeds for fruits, vegetables and other crops including corn, soybeans as well as the popular weed-killer Roundup. Deutsche Bank analysts said a deal could shift Bayer’s center of gravity to agriculture, accounting for about 55 percent of core earnings, up from roughly 28 percent last year. Bayer’s healthcare-focused investor base would be unhappy about the shift, the bank said.
Bayer would probably need to pay 14 to 16 times Monsanto’s core earnings, implying a takeover price including debt of 57 to 65 billion euros, according to Citi analysts.
‘A Perfect Match’
Bayer had said on Thursday that its executives met recently with their Monsanto counterparts “to privately discuss a negotiated acquisition” of the specialist in genetically modified crop seeds, which is headquartered in St. Louis, Missouri. Monsanto said then that it was reviewing Bayer’s proposal.
Bayer said it plans to finance the acquisition with a combination of debt and equity. It said that it “is prepared to proceed immediately to due diligence and negotiations and to quickly agree to a transaction.”
Monsanto is a perfect match to our agricultural business. We would combine complementary skills with minimal geographic overlap. At the same time, ongoing consolidation activities in the industry make this combination by far the most attractive one.Werner Baumann, Chief Executive Officer, Bayer
(With inputs from Reuters and AP)
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