German chemical and pharma giant Bayer AG today announced acquisition of global biotech major Monsanto for USD 66 billion in largest all-cash deal ever, to create the world's biggest seed and pesticide firm. Both Bayer and Monsanto have presence in India with the US firm selling genetically modified (GM) cotton seeds in the country for more than a decade.
The deal, which is reported to be the largest all-cash transaction on record, marks a major consolidation in global seed business. Recently, Monsanto's rival Syngenta was acquired by China's state-owned firm ChemChina. After negotiating for nearly four months, Bayer and Monsanto today announced "they signed a definitive merger agreement under which Bayer will acquire Monsanto for USD 128 per share in an all-cash transaction."
The board of the two companies have unanimously approved the agreement. The deal is expected to close by the end of 2017, Bayer and Monsanto said in a joint statement. The offer of USD 128 per share is 44 per cent higher than the closing price of Monsanto's share on May 9, the day before Bayer's first written proposal to Monsanto.
USD 128 per share in all-cash transaction, represents 44 per cent premium to Monsanto shareholders and an aggregate value of USD 66 billion, the statement said.
Bayer had revised its offer multiple times before it finally clinched the deal today. It first offered USD 122 per share, which was subsequently raised to USD 125 per share and USD 127.50. Finally, the deal was today signed at USD 128 a share. Bayer said it intends to finance the transaction with a combination of debt and equity. The equity component of about USD 19 billion is expected to be raised through an issuance of mandatory convertible bonds and through a rights issue with subscription rights.
Bridge financing for USD 57 billion is committed by BofA Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan, it added.
In addition, Bayer has committed to a USD 2 billion reverse antitrust break fee, reaffirming its confidence that it will obtain the necessary regulatory approvals, it said.
The acquisition is subject to customary closing conditions and regulatory approvals. Bayer CEO Werner Baumann said,
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, delivering substantial value to shareholders, our customers, employees and society at large.
Hugh Grant, Chairman and Chief Executive Officer of Monsanto said,
We believe that this combination with Bayer represents the most compelling value for our shareowners, with the most certainty through the all-cash consideration
Monsanto, which played a key role in increasing cotton output through genetically modified technologies, has three entities in India Monsanto India Ltd (MIL), Monsanto Holdings Pvt Ltd (MHPL) and JV firm Mahyco Monsanto Biotech India Ltd (MMBL) with a staff strength of more than 1,000. Bayer CropScience, a listed Indian entity, posted a turnover of Rs 3,818.60 crore last fiscal. Besides crop science, Bayer also has interest in pharmaceuticals, animal health and consumer health in the country.