A bid for $66 billion – Accepted.

    The  German conglomerate offers couple of times a deal for buying  Monsanto, the American pharmaceutical company and now they finally agree on this deal. .  Let’s take a look in details of the deal between BAYER AG and MONSANTO 


In a rapidly consolidating sector already dominated by just a handful of players, Bayer AG’s  $66 billion deal with U.S. based Monsanto Co. has significant implications for farmers and the industry. .   Both of them are major manufactures of agrochemicals, seeds and genetically modified crops. There are concerns that such genetic engineering cuts down a natural biodiversity and exposes the food supply to risk from disease and unpredictable weather.  The consolidation of two big industry players into one of the world’s largest agrochemical firms will limit the farmer choice and bargaining power, with increasing seed expected to be passed on the grocery aisles. .  In  response to potential antitrust concerns, the companies said they will work “dilligently” with the regulators to propel the deal forward and that Bayer would pay  $2 billion as an antitrust break-up fee “reaffirming its confidence that it will obtain the necessary regulatory approvals”.  That is doubtless due to the regulatory juggernaut that Bayer’s deal still has to go through, with both European and American agencies showing increased skepticism toward big deals of any sort. 

 Bayer AG  rose 3% in early Wednesday trade after its $66 billion, $128-per-share bid  for Monsanto Co . Top executives appeared on TV to say they expect regulators to approve it, and Bayer stock was lifted in response. 


Terms of the deal 

 The terms of the deal, announced in the press, include $19 billion in new Bayer stock, in the form of mandatory convertible shares with subscription rights, and $47 billion in cash, to be financed through a $57 billion bridge loan which has already been obtained.

 The price is 44% more than Monsanto was worth in May, and 19% above the $106 per share it was worth before the deal was announced. Assuming the deal does go through, the shareholders are going to do very well. 

Regulators may protest that Monsanto makes GMOs a two-way race between Bayer, a German company, and Syngenta AG (NYSE:SYT), whose sale to ChemChina is now being finalized. Monsanto would give Bayer a market cap north of $130 billion — hefty, but still well short of pharmaceutical giants like Merck & Co., Inc. (NYSE:MRK), Pfizer Inc. (NYSE:PFE) and Johnson & Johnson Inc. (NYSE:JNJ).

That’s part of the hope here — that Monsanto’s roughly $15 billion in annual sales, and $3.5 billion in net income, can deliver to Bayer the financial kick it needs to play in those big leagues of drug discovery. This deal would more than double Bayer’s sales, and triple its net income.  




J. Mason