June 20, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Germany’s Bayer AG is apparently trying to sell off its radiology supplies unit. That business division could go for more than $3 billion.
Bayer is in the midst of a merger bid with St. Louis, Missouri-based Monsanto , although that deal appears to have stalled. On May 23, Bayer made its bid for the company official. It was an all-cash offer for all issued and outstanding Monsanto common stock for $122, which has a total value of about $62 million (US).
“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 at the time. “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.”
On May 24, Monsanto rejected the bid, although said it was open to further discussions. Bayer said it wants an inside look at the company’s finances before making another bid, but Monsanto is hoping for a better offer before allowing an inspection of its confidential data.
That bid is for around $62 billion. Bayer indicates that its interest in selling its radiology supplies unit is not designed to finance the Monsanto deal.
Bayer has said that for the Monsanto deal it would arrange more than $40 billion in short-term bridge loans. Then another $20 billion or more would be handled by way of longer-term financing such as bonds and long-term loans.
The radiology business creates about $1.7 billion (US) in annual revenue. Products include Ultravist for computer tomography scans, and Gadovist for magnetic resonance imaging (MRI) scans.
Bidnessetc points out that the sale would be consistent with its current efforts to focus on high-growth assets and divesting low-performing assets. As a result, its health care division would focus more on consumer care products and prescription medications.
This strategy has been fairly effective. In 2014, Bayer sold its vascular catheters division to Boston Scientific Corp. for about $415 million. In 2015, it unloaded its blood glucose meter business to Panasonic Healthcare Holdings for about 1.02 billion euros.
“The management’s interest in selling the company’s radiology business should not therefore come as a surprise,” writes Bidnessetc. “However, the company may also be considering other strategic alternatives and might end up keeping the unit, the sources said. It is currently in talks with various investment banks and plans to hire a financial advisor to help it in weighting the possible options. Bayer has not yet commented on the development.”
Monsanto employs about 20,000 people and makes seeds for fruits, vegetables and other crops, such as corn, soybeans and cotton. It also manufactures Roundup, a weed killer. Bayer employs about 117,000 people worldwide.
The Monsanto-Bayer deal isn’t particularly popular. First, the bid came only three weeks after Baumann took over as chief executive officer. At least one major shareholder called the bid “arrogant empire-building.”
Bidnessetc writes, “The deal also faces the hurdle of anti-trust clearance from the European and US regulators. The Street remains skeptical about the acquisition and continues to believe that chances of success of the deal are scarce.”
