Bayer has formally quantified its unsolicited offer to acquire Monsanto, first revealed last week, to create the world’s biggest seeds, agrochemicals and precision agriculture business, subject to shareholder and regulatory approval.
It is the latest move in a global agchem restructuring that was started by Monsanto a year ago with its bid for Syngenta. The resulting frenzy to release shareholder value in a deflationary agricultural market has seen Syngenta agree to a bid from ChemChina, while Dow and DuPont are proposing to merge their global agricultural operations in a separate business that may be floated as an independent. But all options are dependent on scrutiny by competition authorities, which are likely to demand divestments in areas of market strength.
Bayer is offering $122 per share, totalling $62 billion for Monsanto, which it says is a 37% premium over the current share price and 33% up on the six month average. It also expects to make synergistic savings of at least $1.5bn in the first three years. It says the “acquisition of Monsanto would be a compelling opportunity to create a global agriculture leader, while reinforcing Bayer as a Life Science company with a deepened position in a long-term growth industry”.
Bayer CropScience had calendar 2015 revenues of €10.37bn (22% of overall Bayer Group sales of €46.32bn) while Monsanto had revenues of $15bn in the year ended August 31st 2015.
The combined business would bring together Monsanto’s world market leadership in seeds and traits with Bayer’s wide crop protection business, plus major global positions in biologics and digital farming platforms. It would also be geographically complementary, in growing Bayer’s presence in the Americas, Europe and the Asia-Pacific region. If successful, Bayer would base the global Seeds & Traits division and North American commercial headquarters at the former Monsanto HQ in St. Louis, Missouri, while the global Crop Protection and divisional Crop Science headquarters would be at Bayer’s Monheim centre in Germany. Digital Farming for the combined business would be based near San Francisco, California.
“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,” says Werner Baumann, Bayer’s new chief executive. “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.”
Liam Condon, head of the Crop Science Division and a member of Bayer’s board of management, added: “Bayer is committed to enabling farmers to sustainably produce enough healthy, safe and affordable food capable of feeding the world’s growing population. Faced with the complex challenge of operating in a resource-constrained world with increasing climate volatility, there is a clear need for more innovative solutions that advance the next generation of farming. By supporting farmers of all sizes on every continent, the combined business would be positioned as the partner of choice for truly integrated, superior solutions.”
Monsanto has acknowledged receipt of Bayer’s offer, but says it will make no further comment until its board has fully reviewed the offer with its financial and legal advisers. “There is no assurance that any transaction will be entered into or consummated, or on what terms,” it notes.