Bayer has agreed terms with Monsanto for a $66bn (£50bn) takeover to create the world’s biggest seeds and pesticides group.
The German life sciences firm has been pursuing its target for the past five months, with offers worth $62bn and $64bn both previously rejected as “financially inadequate”.
“This represents a major step forward for our crop science business”
Bayer CEO Werner Baumann
Bayer will acquire Monsanto for $128 a share in one of the largest all-cash deals ever recorded – a premium of 44% to the price of stock back in May when a written proposal was first made.
Combined sales of the agricultural businesses totalled €23bn in 2015, with Bayer flagging up “significant long-term growth potential”. The deal will give the new group control of almost 30% of the global pesticides market, according to estimates from Morgan Stanley. It would also sell roughly 36% of US maize seeds and 28% of soybean seeds.
Bayer expects EBITDA to receive a $1.5bn boost after three years from synergies and cost savings.
Controversy
The pursuit of the US agritech company has been surrounded by controversy, with Bayer facing protests from anti-GM campaigners and farmer worries that a merger would dramatically drive up input costs and push up food prices.
Bayer and Monsanto said in a statement confirming the deal that a combined R&D budget of €2.5bn would accelerate innovation and result in “significant and lasting” benefits for farmers.
“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,” Bayer CEO Werner Baumann added.
Monsanto chairman and CEO Hugh Grant 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.”
The combined agriculture business will have its global seeds & traits and North American commercial headquarters in St. Louis, Missouri; its global crop protection and overall crop science headquarters in Monheim, Germany; a significant presence in Durham, North Carolina; as well as many other locations throughout the US and around the world.
“This combination is a great opportunity for employees, who will be at the forefront of innovation in our sector,” Baumann said. “This transaction also enhances Bayer’s strong commitment to the US, building on our 150-year history with operations across 25 states employing more than 12,000 people in the country.”
The acquisition is subject to Monsanto shareholder approval and regulatory clearance, with the merger expected to complete by the end of 2017. Bayer is confident the deal will get the clearance from watchdogs and has committed to a $2bn reverse anti-trust break fee if it fails to get over the line.
Shares in Bayer are up 3% to €96 since the deal was announced.
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