Bayer offers $62 bn to acquire US based Monsanto

The Dollar Business Bureau

Germany based chemical and pharmaceutical company, Bayer AG, has offered an all-cash deal to acquire a US based seeds firm, Monsanto Co, for a total value of $62 billion. Monsanto’s board is still reviewing this unsolicited proposal by consulting with financial and legal advisors.

Monsanto Co has a strong presence in India with subsidiary companies namely - Monsanto India Ltd (MIL), Monsanto Holdings Pvt Ltd (MHPL), and another joint venture firm, Mahyco Monsanto Biotech India Ltd (MMBL). These three firms have more than 000 staff and generate huge turnover annually.

Bayer is planning to create a leading integrated agri-business with this deal by enhancing its product portfolio and R&D pipeline. It aims to deliver more innovative solutions for farmers. The company has targeted to achieve mid-single digit growth in the first year after closing the deal and double-digit growth thereafter.

The total synergies are expected at $1.5 billion after the third year of acquisition, along with more integrated benefits in the coming years. Post-acquisition Bayer could become an agriculture leader in crop protection, biologics, digital farming, seeds and traits businesses across the global markets, the company said.

This is for the first time Bayer has made the biggest all-cash deal for a single company. It offered $122 per share, which is 37% higher than Monsanto’s share price of $89.03 as on May 9, 2016. The merger would also be expanding Bayer’s strong presence in the Americas, Europe and Asia-Pacific. Consumers of both the companies would be benefited from the enhanced product portfolio.

Both the companies share similar vision and this merger can create an integrated business that is capable of generating substantial value for the shareholders, said Werner Baumann, CEO of Bayer AG. The two companies have collective expertise and innovative capabilities to work together for the benefit of consumers, employees and the farming communities, he added.

Bayer enables the farmers to produce affordable food to feed the growing population in the world, said Liam Condon, Member in the Board of Management of Bayer AG and head of the Crop Science Division.

Bayer is confident in closing the transaction based on the discussions with the support of banks such as BofA Merrill Lynch and Credit Suisse, which are also acting as financial advisors to the company. It plans to finance the transaction with a combination of debt and equity, it said.