Major merger announced between Bayer and Monsanto

first_imgShare Facebook Twitter Google + LinkedIn Pinterest Bayer and Monsanto today announced that they signed a definitive merger agreement under which Bayer will acquire Monsanto for a whopping $66 billion.That number combines $128 per Monsanto share (putting the St. Louis-based company’s equity at about $56 billion) and roughly $10 billion in debt Bayer is taking on with the merger. The next hurtle will be getting the massive deal approved by regulators, which some experts feel will not happen. If regulators prevent the deal, Bayer must to pay $2 billion to Monsanto.Monsanto’s Board of Directors, Bayer’s Board of Management and Bayer’s Supervisory Board have unanimously approved the agreement.“Today’s announcement is a testament to everything we’ve achieved and the value that we have created for our stakeholders at Monsanto. We believe that this combination with Bayer represents the most compelling value for our shareowners, with the most certainty through the all-cash consideration,” said Hugh Grant, Chairman and Chief Executive Officer of Monsanto.Based on Monsanto’s closing share price on May 9, 2016, the day before Bayer’s first written proposal to Monsanto, the offer represents a premium of 44% to that price.“We are pleased to announce the combination of our two great organizations. This represents a major step forward for our Crop Science business and reinforces Bayer’s leadership position as a global innovation driven Life Science company with leadership positions in its core segments, delivering substantial value to shareholders, our customers, employees and society at large,” said Werner Baumann, CEO of Bayer AG.In a combined press statement Bayer and Monsanto said the transaction brings together two different, but highly complementary businesses. The combined business will benefit from Monsanto’s leadership in Seeds & Traits and Climate Corporation platform along with Bayer’s broad Crop Protection product line across a comprehensive range of indications and crops in all key geographies. As a result, they say farmers will benefit from a broad set of solutions to meet their current and future needs, including enhanced solutions in seeds and traits, digital agriculture, and crop protection.The combination also brings together both companies’ leading innovation capabilities and R&D technology platforms. Over the mid to long-term, the combined business will be able to accelerate innovation and provide customers with enhanced solutions and an optimized product suite based on analytical agronomic insight supported by Digital Farming applications.“The agriculture industry is at the heart of one of the greatest challenges of our time: how to feed an additional 3 billion people in the world by 2050 in an environmentally sustainable way. It has been both companies’ belief that this challenge requires a new approach that more systematically integrates expertise across Seeds, Traits and Crop Protection including Biologicals with a deep commitment to innovation and sustainable agriculture practices,” said Liam Condon, member of the Board of Management of Bayer AG and head of the Crop Science Division.The combined agriculture business will have its global Seeds & Traits and North American commercial headquarters in St. Louis, Missouri, its global Crop Protection and overall Crop Science headquarters in Monheim, Germany, and an important presence in Durham, North Carolina, as well as many other locations throughout the U.S. and around the world. The Digital Farming activities for the combined business will be based in San Francisco, California.“This combination is a great opportunity for employees, who will be at the forefront of innovation in our sector. This transaction also enhances Bayer’s strong commitment to the U.S., building on our 150-year history with operations across 25 states employing more than 12,000 people in the country. I am convinced that Monsanto will flourish as part of one of the most respected and trusted companies in the world,” Baumann said.There are, of course, significant concerns with a merger of this size in the agricultural industry. The National Corn Growers is taking a closer look at the potential ramifications of the merger.“The National Corn Growers Association is committed to protecting the best interests of our nation’s corn farmers. Our primary concern with respect to any merger is how it may affect input costs — particularly given the current farm economy. With respect to a previously announced merger, we completed a thorough analysis that informed the comments and information we provided to the U.S. Department of Justice during their investigation into the merger,” said Chip Bowling, Maryland farmer and president of the NCGA. “We would anticipate following a similar path with respect to this merger so that we can truly understand the merger’s impact on agricultural research, innovation, and competitive pricing of farm inputs.”John Colley is a professor at the United Kingdom-based Warwick Business School in the Strategy & International Business group who researches large takeovers. He said mergers such as this potentially create a number of challenges.“Apart from Monsanto’s shareholders, who have hit the jackpot, this looks like a lose-lose bid. Bayer has been forced into paying too much and face major integration and competition authority risks,” Colley said. “By the time the competition authorities have finished with their demands Bayer may regret setting a German record. The farmers will lose out as product ranges are rationalized and attempts are made to increase prices. Bayer may have won the bid now, but could regret the move at their leisure. Bayer CEO Werner Baumann may be cursing his luck. Bayer’s shareholders may be cursing him.”last_img

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