Bayer Completes Monsanto Acquisition for $63 Billion

Bayer announced on June 7, 2018 that it completed its $63-billion acquisition of Monsanto.

Bayer announced its intention to acquire Monsanto in May 2016 and formally announced the deal for $128 per share in September 2016. The deal corresponds to a total cost of approximately $63 billion taking into account Monsanto’s debt outstanding as of February 28, 2018, Bayer reports. 

Shares in the US company will no longer be traded on the New York Stock Exchange with Bayer now the sole owner of Monsanto Company. Monsanto shareholders are being paid $128 per share.  Bayer has now obtained almost all clearances, which are conditions for closing the transaction. The company says it expects to receive any outstanding approvals required for completing the transaction shortly. Bayer will become the sole shareholder of Monsanto following the receipt of outstanding approvals. 

In connection with the regulatory approval process, Bayer has agreed to the divestiture of businesses which generated EUR 2.2 billion (US$2.6 billion) in sales in 2017 for an aggregate base purchase price of EUR 7.6 billion (US$9 billion). Including Monsanto and taking the divestitures into account, the health and agriculture businesses would have been roughly equal in size in 2017, with total pro forma sales of around EUR $45 billion (US$53 billion) including combined Crop Science sales of around EUR 20 billion (US$24 billion). In 2017, both companies together employed approximately 115,000 people, accounting for the divestments.

The deal was conditionally approved by the Antitrust Division of the United States Department of Justice (DOJ) in May 2018 and by the European Commission (EC) in March 2018. According to Bayer, it has also received approvals for the transaction from more than half of approximately 30 regulatory authorities, including those in Brazil and China.

According to the DOJ’s conditional approval, the integration of Monsanto into Bayer can take place as soon as the divestments to BASF have been accomplished. This is expected to be in approximately two months, according to Bayer. As of June 7, 2018, Bayer is the sole shareholder of Monsanto. 

Bayer will remain the company name, while Monsanto will no longer be a company name. The acquired products will retain their brand names and become part of the Bayer portfolio.

Bayer states that the acquisition is expected to generate significant value. Bayer expects a positive contribution to core earnings per share starting in 2019. From 2021 onward, that contribution is expected to be double-digit percentage. Additionally, adjusted for divestments, Bayer expects synergies to deliver annual contributions of $1.2 billion to earnings before interest, taxes, depreciation and amortization before special items as of 2022, according to the company.

In order to acquire Monsanto, Bayer secured initial bridge financing of $57 billion. Bayer reports this is being refinanced by a combination of equity and debt transactions, some of which have already been completed. The final equity measure will be a rights issue, which was announced on June 3, 2018.

Liam Condon, member of the Bayer board of management, will lead the combined Crop Science Division when the integration commences. Until that time, Monsanto will operate independently from Bayer.

“Today’s closing represents an important milestone toward the vision of creating a leading agricultural company, supporting growers in their efforts to be more productive and sustainable for the benefit of our planet and consumers,” said Hugh Grant, outgoing chairman and CEO of Monsanto, in the release. 

Source: Bayer