Bayer said it disclosed the private proposal in response to market speculation and stakeholder inquiries. The proposal includes an all-cash offer for all of the issued and outstanding shares of common stock of Monsanto for $122 per share.
This proposal comes on the heels of several other significant deals in the industry including Dow Chemical and DuPont, which agreed to a merger in December 2015. Last year, Monsanto made several unsuccessful bids for Syngenta, before pulling its proposals in August 2015. Syngenta indicated that Monsanto’s proposals did not meet the Swiss company’s financial expectations.
Syngenta agreed in February to be acquired by China National Chemical Corporation.
Bayer said its May 10 written proposal for Monsanto represents a substantial premium of 37% over Monsanto’s closing share price of $89.03 on May 9; 36% over the three-month volume weighted average share price; 33% over the six-month volume weighted average share price; and last 12 months EBITDA multiple of 15.8x as of Feb. 29.
“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,” said Werner Baumann, chief executive officer of Bayer AG. “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.”
The combination is expected to provide Bayer’s shareholders with accretion to core EPS by a mid-single-digit percentage in the first full year after closing and a double-digit percentage thereafter. Initially, Bayer expects annual earnings contributions from total synergies of approximately $1.5 billion after year three plus additional integrated offer benefits in future years.
Bayer said this transaction would bring together leading Seeds & Traits, Crop Protection, Biologics, and Digital Farming platforms. Specifically, the combined business would benefit from Monsanto’s leadership in Seeds & Traits and Bayer’s broad Crop Protection product line across a comprehensive range of indications and crops. The combination would also be truly complementary from a geographic perspective, significantly expanding Bayer’s long-standing presence in the Americas and its position in Europe and Asia/Pacific. Customers of both companies would benefit from the broad product portfolio and the deep R&D pipeline.
“Bayer is committed to enabling farmers to sustainably produce enough healthy, safe and affordable food capable of feeding the world’s growing population,” said Liam Condon, member of the board of management of Bayer AG and head of the Crop Science Division. “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.”
Under the proposed transaction, the combined business would provide attractive opportunities for the employees of both companies and have its global Seeds & Traits and North American commercial headquarters in St. Louis, Missouri, U.S.; its global Crop Protection and divisional Crop Science headquarters in Monheim, Germany; and an important presence in Durham, North Carolina, U.S., as well as many other locations throughout the U.S. and around the world. Digital Farming for the combined business would be based near San Francisco, California.
Bayer is highly confident in its ability to finance the transaction based on advanced discussions with and support from its financing banks, BofA Merrill Lynch and Credit Suisse. The offer is not subject to a financing condition. Bayer intends to finance the transaction with a combination of debt and equity. The expected equity portion represents approximately 25% of the transaction’s enterprise value and is expected to be raised primarily via a rights offering.