Monsanto accepts sweetened offer from Bayer; hurdles remain

Werner Baumann (left), CEO of Bayer AG, and Hugh Grant, Chairman and Chief Executive Officer of Monsanto. Photo: BayerWerner Baumann (left), CEO of Bayer AG, and Hugh Grant, Chairman and Chief Executive Officer of Monsanto.
Photo: Bayer

German chemical powerhouse Bayer has finally made an offer sweet enough to sway seed seller Monsanto to sell today.

After declining two lower offers, this time Monsanto accepted Bayer’s proposal of an all-cash deal worth $66 billion, or $128 per share.

Bayer will take on $57 billion in debt to finance the purchase, but expects to generate $1.2 billion in annual cost synergies and $300 million in additional sales after three years.

The announced merger is the biggest deal of 2016 and the largest all-cash transaction on record. While it makes sense for the two to combine to become a one-stop shop of seeds and pesticides, investors are skeptical about whether the merger will make it past regulatory obstacles.

Similar potential mergers have been delayed due to regulators. For example, a merger between DuPont and Dow Chemical that was agreed upon in December of last year is unlikely to close until early 2017 after the European Commission started an investigation.

Syngenta and ChemChina just recently received approval from the Committee on Foreign Investment in the United States, but still has to be scrutinized by European regulators for antitrust issues before being finalized.

“Bayer’s competitors are merging, so not doing this deal would mean having a competitive disadvantage,” Markus Manns, a fund manager at Union Investment, told Reuters.

If the deal does fail to receive regulatory clearance Bayer, will have to pay Monsanto a $2 billion breakup fee.

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