Amid Shareholder Pressure, Bayer AG Makes Formal $62 Billion Bid for Monsanto

Published: May 24, 2016

Amid Shareholder Pressure, Bayer AG Makes Formal $62 Billion Bid for Monsanto May 23, 2016
By Mark Terry, BioSpace.com Breaking News Staff

After rumors on May 12 went public that Bayer AG was considering an acquisition of Monsanto , investors and stockholders pushed for more information. In response, Bayer released details about its private proposal to acquire Monsanto today.

Bayer has, indeed, made an all-cash offer for all issued and outstanding Monsanto common stock for $122, which has an total value of about $62 million (US). This is a 37 percent premium over Monsanto’s closing share price of $89.03 on May 9, 2016.

“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,” said Werner Baumann, chief executive officer of Bayer AG, 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 framers, consumers, our employees and the communities in which we operate.”

The bid came only three weeks after Baumann stepped into the job as Bayer chief executive. At least one major shareholder criticized the bid as “arrogant empire-building,” according to Reuters.

In a conference call, Baumann said, “We fully expect a positive answer of the Monsanto board of directors,” and responded to criticism as “an uneducated reaction in the media.”

At least one analyst feels that the current bid may not have much room for negotiation. “The price that has now been disclosed is at the upper limit and it is just about economical,” Marcus Manns, a fund manager at Union Investment, told Reuters. “Should it rise further, which is to be assumed, the takeover will become increasingly unattractive.”

If the deal goes through, the merged companies’ seeds business and North American headquarters would be in St. Louis, which is Monsanto’s current headquarters. Pesticides and crop science businesses would be located in Germany. Digital farming would be based near San Francisco.

Monsanto employs about 20,000 people and makes seeds for fruits, vegetables and other crops, such as corn, soybeans and cotton. It also manufactures the weed-killer Roundup. Bayer employs about 117,000 people worldwide.

There has been major consolidation in the chemical and agribusiness industry lately. Midland, Michigan’s Dow Chemical is merging with Wilmington, Delaware-based DuPont to create DowDuPont. The merged companies will have a market capitalization of about $130 billion.

In February, the Chinese government-owned China National Chemical announced plans to buy Swiss-based Syngenta for $43 billion, which would create the world’s largest supplier of crop-protection products.

Monsanto has considered previous deals with Bayer, as well as Germany’s BASF. These deals ranged from full mergers to selling off business units, as well as joint ventures. Bayer proposed a full takeover of Monsanto in March, but Monsanto reportedly declined.

In 2015, Monsanto attempted to acquire Syngenta for $46.2 billion, but was declined.

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