German global healthcare and agricultural leader Bayer AG (ETR: BAYN) agreed to acquire St. Louis, Missouri-based global agri-chemical leader Monsanto Company (NYSE: MON) for $128 per share in an all-cash transaction representing a 44 percent premium to Monsanto shareholders and an aggregate value of $66 billion. The boards of both companies have unanimously approved the transaction.
The sweetened deal represents a 4.9% increase over Bayer’s original offer in May of $122 a share.
The merger will create a global agriculture leader, while reinforcing Bayer as a Life Science company with a deepened position in a long-term growth industry. Bayer expects annual earnings contributions from total synergies of approximately $1.5 billion after year three.
“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.
“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 of Monsanto.
This transaction would bring together leading Seeds & Traits, Crop Protection, Biologics, and Digital Farming platforms. Specifically, the combined business would benefit from Monsanto’s leadership in Seeds & Traits and Bayer’s broad Crop Protection product line across a comprehensive range of indications and crops. The combination would also be truly complementary from a geographic perspective, significantly expanding Bayer’s long-standing presence in the Americas and its position in Europe and Asia/Pacific. Customers of both companies would benefit from the broad product portfolio and the deep R&D pipeline.
Under the proposed transaction, the combined business would provide attractive opportunities for the employees of both companies and have its global Seeds & Traits and North American commercial headquarters in St. Louis, Missouri, its global Crop Protection and divisional 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. Digital Farming for the combined business would be based near San Francisco, California.
Bayer intends to finance the transaction with a combination of debt and equity. The equity component of approximately USD 19 billion is expected to be raised through an issuance of mandatory convertible bonds and through a rights issue with subscription rights. Bridge financing for USD 57 billion is committed by BofA Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan.
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.
The acquisition is subject to customary closing conditions, including Monsanto shareholder approval of the merger agreement and receipt of required regulatory approvals. Closing is expected by the end of 2017.
BofA Merrill Lynch and Credit Suisse are acting as lead financial advisors and structuring banks to Bayer in addition to providing committed financing for the transaction; Rothschild has been retained as an additional financial advisor to Bayer. Bayer’s legal advisors are Sullivan & Cromwell LLP (M&A) and Allen & Overy LLP (Financing).
Morgan Stanley & Co. and Ducera Partners are acting as financial advisors, and Wachtell, Lipton, Rosen & Katz is acting as legal advisor to Monsanto.
Bayer is a global enterprise with core competencies in the Life Science fields of health care and agriculture. Its products and services are designed to benefit people and improve their quality of life. At the same time, the group aims to create value through innovation, growth and high earning power. Bayer is committed to the principles of sustainable development and to its social and ethical responsibilities as a corporate citizen. In fiscal 2015, the group employed around 117,000 people and had sales of EUR 46.3 billion. Capital expenditures amounted to EUR 2.6 billion, R&D expenses to EUR 4.3 billion. Bayer AG was founded in 1863 and is headquartered in Leverkusen, Germany.
Monsanto provides agricultural products for farmers worldwide. It operates in two segments, Seeds and Genomics, and Agricultural Productivity.
The Seeds and Genomics segment produces raw crop seeds, including corn, soybean, cotton, and canola seeds under the DEKALB, Channel, Asgrow, and Deltapine brands; and vegetable seeds, such as tomato, pepper, melon, cucumber, squash, beans, broccoli, onions, lettuce, and others under the Seminis and De Ruiter brands. It also develops biotechnology traits that assist farmers in controlling insects and weeds in corn, soybean, cotton, and canola crops under the SmartStax, YieldGard, YieldGard VT Triple, VT Triple PRO, and VT Double PRO brands; and Intacta RR2 PRO, and Bollgard and Bollgard II, as well as Roundup Ready and Roundup Ready 2 Yield, and Genuity brands. This segment also licenses a range of germplasm and trait technologies to large and small seed companies.
The Agricultural Productivity segment manufactures and sells herbicides for agricultural, industrial, ornamental, turf, and residential lawn and garden applications for weed control, as well as for control of preemergent annual grass and small seeded broadleaf weeds in corn and other crops under the Roundup and Harness brands.
The company markets its products through distributors, independent retailers and dealers, agricultural cooperatives, plant raisers, and agents, as well as directly to farmers. Monsanto Company has a collaborative agreement with Novozymes to discover, develop, and produce microbial solutions. The company was formerly known as Monsanto Ag Company and changed its name to Monsanto Company in March 2000. Monsanto was founded in 2000, it has more than 20,000 employees, and is headquartered in St. Louis, Missouri.