Bayer AG announced on June 7 that it has completed its acquisition of St. Louis-based Monsanto, following the receipt of all required approvals from regulatory authorities. Bayer said it is now the sole owner of Monsanto, and Monsanto shares will no longer be traded on the New York Stock Exchange.
“Today is a great day: for our customers, farmers around the world whom we will be able to help secure and improve their harvests even better; for our shareholders, because this transaction has the potential to create significant value; and for consumers and broader society, because we will be even better placed to help the world’s farmers grow more healthy and affordable food in a sustainable manner,” said Werner Baumann, Chairman of the Bayer board of management. “Our sustainability targets are as important to us as our financial targets. We aim to live up to the heightened responsibility that a leadership position in agriculture entails and to deepen our dialogue with society.”
The final conditional regulatory clearances came from India on May 22, the U.S. Department of Justice (DOJ) on May 29 (GM June 1, p. 1), Canada’s Competition Bureau on May 30, and Mexico’s anti-trust agency on June 4. To satisfy regulators, Bayer has agreed to sell a range of assets to German competitor BASF SE in a divestiture package valued at $9 billion, the largest ever in a U.S. merger-enforcement case, the DOJ said. Bayer valued the divested businesses at a base purchase price of €7.6 billion, and said they generated some €2.2 billion in sales in 2017.
“Today’s closing represents an important milestone toward the vision of creating a leading agricultural company, supporting growers in their efforts to be more productive and sustainable for the benefit of our planet and consumers,” said Hugh Grant, outgoing chairman and CEO of Monsanto. “I am proud of the path we have paved at Monsanto and look forward to the combined company helping move modern agriculture forward.”
Bayer said its May 2016 proposal to acquire Monsanto for $128 per share equates to a current total cost of approximately $63 billion, considering Monsanto’s outstanding debt as of Feb. 28, 2018. The integration of Monsanto into Bayer is scheduled to start once the BASF sale has been completed, which is expected in approximately two months. Until that time, Monsanto will operate independently from Bayer.
Bayer will remain the company name, with Monsanto’s name dropped after integration, the company announced. Bayer said all acquired products in the deal will retain their brand names but will become part of the Bayer portfolio. Bayer is based in Leverkusen, Germany.
“We have diligently prepared for the upcoming integration over the past two years,” said Baumann. “Our extensive experience in integrating other large companies has proven that we can and will be successful.”
Bayer said the Monsanto acquisition is the largest in the company’s history, and will double the size of its agriculture business. Bayer said the acquisition is expected to generate significant value, including a positive contribution to earnings per share in 2019 ,which is expected to grow to a double-digit percentage by 2021. Bayer expects synergies to deliver annual contributions of $1.2 billion to EBITDA before special items as of 2022.
In order to finance the acquisition, Bayer secured initial bridge financing of $57 billion through a combination of equity and debt transactions, some of which have already been completed. The final equity measure will be to raise €6 billion in a rights offering and €20 billion from bond sales, which was announced on June 3.
Under the rights offering, existing shareholders will be able to buy two new shares for every 23 held at a price of €81, Bayer said, representing a discount of about 22 percent to Bayer’s June 1 closing price. The offering has been underwritten by a group of 20 banks, with Bank of America Merrill Lynch and Credit Suisse serving as the joint global coordinators, Bloomberg reported.
The merger of Bayer and Monsanto has had its share of critics since the deal was first announced, many of whom expressed concerns that the combined global monolith would be bad for consumers and the environment. The deal is the third in a series of recent mega-mergers, following Dow Chemical Co.’s merger with DuPont Co. and China National Chemical Corp.’s takeover of Syngenta AG.
Bayer sought to ease those anxieties on June 4, saying it was committed to enhancing stakeholder engagement. “We aim to deepen our dialogue with society,” said Baumann. “We will listen to our critics and work together where we find common ground. Agriculture is too important to allow ideological differences to bring progress to a standstill. We have to talk to each other. We need to listen to each other. It’s the only way to build bridges.”