Bayer to acquire Monsanto for $66bn

Posted on 18 Sep 2016 by Michael Cruickshank

German pharmaceutical and chemical company Bayer AG this week announced plans to acquire US biotech firm Monsanto.

The company said in a statement that it would buy Monsanto for a price of $128 per share, representing a 44% premium on company’s prior share price.

All up, the deal would cost Bayer a massive $66bn, making it one of the largest ever deals in the sector.

Talks to finalize this deal had been ongoing for more than four months, however now they appear to have finally reached a conclusion.

“We are pleased to announce the combination of our two great organizations,” said Werner Baumann, CEO of Bayer AG.

“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…”

Bayer went on to say that the decision was made to acquire Monsanto based on the two companies ‘different but complementary’ businesses.

Primarily Bayer sees Monsanto’s large inventory of genetically-modified crops and seeds as working well with Bayer’s existing portfolio of crop-protection products such as herbicides and fungicides.

It hopes to use the combination of these two sets of technologies to market solutions which can increase future food production.

“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,” said Liam Condon, head of Bayer’s crop science division.

Bayer plans to pay for the deal through bridge financing from creditors, a new round of share sales and the issuing of convertible bonds.

While it can likely bring together this huge sum of money, it will be more difficult to garner the regulatory approval for it to go ahead.

According to Reuters, analysts put the likelihood of successful regulatory clearance for the deal at between 50-70%.

The primary issue for the deal, which would be the largest ever foreign takeover by a Germany company, is that it would create a company which would control a massive amount of the agrochemicals and agriculture market, and therefore has a large degree of control over global food production.