Bayer Discloses $62B Offer for Monsanto

The deal would create the world's largest agricultural supplier but Bayer shareholders fear it will be detrimental to its pharmaceutical business
Katie Kuehner-HebertMay 23, 2016

Germany’s Bayer AG said Monday it had offered to acquire U.S. seeds company Monsanto for $62 billion in a deal that would create an agrochemical behemoth but may face opposition from its shareholders.

Bayer disclosed details of its proposal in response to market speculation and investor inquiries about a deal. It has offered to pay $122 per share for Monsanto, representing a 37% premium to the closing price on May 9, the day before Bayer made its proposal.

The combined companies would be the world’s biggest supplier of crop seeds and pesticides, with annual revenue of more than $67 billion.

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“We have long respected Monsanto’s business and share their vision to create an integrated business that we believe is capable of generating substantial value for both companies’ shareholders,” Bayer CEO Werner Baumann said in a news release.

“Together we would draw on the collective expertise of both companies to build a leading agriculture player with exceptional innovation capabilities to the benefit of farmers, consumers, our employees and the communities in which we operate,” he added.

Monsanto said its board was “carefully reviewing” Bayer’s proposal but declined to comment further. In trading Monday, its stock was up more than 5%, at $106.86.

“It’s a very good initial bid for the company,” James Zoldy, president of Monsanto shareholder Halsey Associates, told The Wall Street Journal. “We think there is some upside from that, and it’s going to have to be finessed by the [Monsanto] board to extract additional value.”

The deal would be the largest foreign takeover by a German company. But the WSJ said it “could also irk some Bayer shareholders who tend to view the company more as a pharmaceutical player than a crop business.”

John Bennett of Henderson Global Investors, one of Bayer’s major shareholders, has condemned its approach to Monsanto as “arrogant empire-building.”

But Baumann, who took over as CEO three weeks ago, said Monday that the shareholder criticism was “an uneducated reaction” and that Bayer would continue to develop its pharmaceutical arm.

Bayer’s drug portfolio includes Yasmin birth control pills and aspirin, the painkiller it invented more than a century ago. “We are not feeding Peter by starving Paul here,” Baumann told reporters.