After months of back and forth, Bayer and Monsanto have confirmed they are in advanced negotiations for Bayer to acquire Monsanto.
Combined, Monsanto and Bayer would account for $67 billion in annual sales and create the world’s largest seed and crop-chemical company. Monsanto would bring more strength in seed traits and sales while Bayer would bring its portfolio of seed treatments and chemicals.
While key terms and conditions have not yet been agreed, Bayer said it has tendered an increased $127.50 per Monsanto share offer.
Monsanto rejected a $125-a-share offer from Bayer in June after the Monsanto board of directors unanimously agreed the dollar figure was financially inadequate.
The proposed merger would be subject to regulatory approval and other customary closing conditions. The key conditions of a definitive agreement must be approved by the supervisory board of Bayer AG.
Monsanto confirmed late Monday that its executives continue talks with Bayer and that Monsanto had indeed received an updated non-binding proposal for $127.50 per share in cash. “Monsanto is continuing these conversations as it evaluates this proposal, as well as proposals from other parties and other strategic alternatives to enable its Board of Directors to determine if a transaction in the best interests of its shareowners can be realized,” Monsanto executives stated in a release.
The offer is not subject to a financing condition. Bayer intends to finance the acquisition with a combination of debt and equity. The expected equity portion represents approximately 25% of the transaction’s enterprise value and is expected to be raised primarily via a rights offering.
Bayer has also offered a $1.5 billion reverse antitrust break fee to Monsanto payable by Bayer to Monsanto if the proposed deal cannot close because antitrust approvals or clearances have not been obtained.
Bayer has specifically said the insecticide pipeline fits very well with the insect-resistance seed-based traits to enhance resistance management in soybeans. The new seed treatment Nematicide from Monsanto fits perfectly withthe strong Bayer Seeds treatment portfolio, offering significant opportunities.
In the mid-term, the wheat programs of both companies would be highly complementary. Also, data-based decision-making will be a key driver to leverage the combined portfolio and pipeline.
Long-term, the next generation herbicide trait system can be created with Bayer’s chemistry and the unique capabilities of Monsanto to modify the genetics of the major row crops.
Under the proposed merger, the combined company would 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 company would be based near San Francisco, California.
The back-and-forth between the two seed-and-chemical companies continues as the industry remains in a state of mergers. Rivals Dow Chemical and DuPont are in the process of merging and waiting approval from antitrust regulators while China National Chemical Corp. (ChemChina) plans to buy Swiss-based Syngenta in a deal that ChemChina states now has received clearance from a U.S. committee that reviews security concerns about foreign transactions.
Other companies, such as Germany-based BASF, could be in a strategic position to acquire any spin-off technologies that might be required of these transactions. Markus Heldt, president of BASF’s Crop Protection division confirmed that attitude during the 2016 Global Press Conference on September 6 held in Ludwigshafen.
“The agrochemical market is evolving and we are actively pursuing opportunities arising from ongoing merger efforts to increase our footprint and value offer,” stated Heldt.