Updated Sept. 14, 2016 7:53 a.m. ET
The deal ends a monthslong courtship by the German pharmaceuticals and chemicals giant of the U.S. seed maker and will be the largest foreign corporate takeover ever by a German firm.
Bayer plans to pay $128 a share for Monsanto in an all-cash transaction, up from its latest offer last week of $127.50 a share, the companies said. The agreed total price was a roughly 6% increase over Bayer’s original offer in May of $122 a share.
Bayer said it expected the deal to generate synergies of $1.5 billion after the third full year following the closing.
The agreement comes roughly four months after Bayer Chief Executive Werner Baumannmade his first—and largely unexpected—bid for Monsanto. The German company initially offered $122 a share back in May.
Since then, Bayer raised its offer twice, including last week’s revised bid, but had so far failed to present Monsanto with a sufficiently high figure.
Mr. Baumann spent countless hours over the summer trying to convince skeptical investors on both sides that a deal would create value for the two companies. Many of his own shareholders questioned whether Bayer could afford such an acquisition given its high debt. The company’s net debt stood at €17.45 billion ($19.71 billion) last year, more than double the €7 billion in 2011.
Many investors had hoped the company would continue to expand its lucrative health-care operations.
The deal with Monsanto would significantly reshape Bayer’s portfolio, shifting it away from its core health-care operations. The group’s crop-science business would comprise roughly half of overall sales, compared with 30% in 2015. The health-care division, including the pharmaceuticals business, would constitute roughly the other half of group sales.
Bayer’s agrochemical division posted revenue of €10.4 billion last year, out of total group sales of €46.3 billion. Monsanto posted total sales of $15 billion in 2015.
Analysts widely expect Bayer and Monsanto to complete a deal, but some still question the merits of such a tie-up and whether it would overcome likely regulatory hurdles.
“We see the Bayer-Monsanto deal as close to an end,” analysts at Germany’s DZ Bank wrote in a note Wednesday morning. “We don’t like the transaction because we think that Bayer is overpaying significantly,” the analysts said.
- Bayer Moving Outside Its Comfort Zone With Monsanto Bid (Sept. 7)
- New Bayer Offer for Monsanto Triggers More Information Sharing(Sept. 6)
- Bayer Raises Offer to Buy Monsanto(Sept. 5)
Still, investors and analysts have noted that Bayer and Monsanto’s agricultural businesses are complementary. Bayer is much stronger in crop chemicals, while Monsanto is a world leader in seeds.
The deal, which would create one of the world’s largest agrichemicals businesses, is the latest in the rapidly consolidating agricultural sector.
Rival seed developers Syngenta AG, Dow Chemical Co. and DuPont Co. have all struck their own deals in recent months. Pressure has built on agrochemical groups to slash costs and build scale as farmers grapple with a three-year slide in crop prices that has forced makers of seeds, crop chemicals, fertilizers and tractors to cut prices and lay off staff.
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