Bayer AG Set to Buy Monsanto

Bayer AG Set to Buy Monsanto

Bayer AG is the well-known group of companies that operate in the chemicals and healthcare sectors. Its headquarters are in Germany. Monsanto Co is the American company that operates in the field of seeds for agriculture.

Bayer is a company that is familiar to many. If not for anything else, then at least for the Aspirin that is a staple of any medicine cabinet.

Monsanto makes and sells seeds for growing plants. It is a global company and the name is not without controversy. Monsanto has been criticized for “patenting plant life”. And parts of the media have taken to the use of the phrase “franken seeds” to describe the GMO seeds that the company puts on the market.

The Deal

Bayer is preparing to buy Monsanto this Wednesday for over $66 billion. If it is going to be successful, this could be the largest deal of the year 2016.

Bayer’s offer for Monsanto is the largest proposal for a cash acquisition on record. With it, Bayer is hoping to position itself at the top of an industry that is consolidating fast, the farm supplies industry.

The two companies together in terms of science means combining Bayer’s crop science with Monsanto’s knowledge about seeds. From a research and development point of view, it’s going to lead to advances in the field.

However, the deal is likely to draw the attention of antitrust regulators. It’s possible that with Bayer buying Monsanto, the new Bayer AG is going to be simply too large.

The negotiations have been going on for the past four months. Last week, Bayer disclosed that the current offer on the table was $127.50 per share. And that’s in cash. The latest offer saw improvements in the negotiation process.

Sources close to the deal say that Bayer is prepared to go as high as $129 a share. That would mean a hefty price tag for Monsanto.

The talks are still going on and any numbers can still change. And any deal is first going to have to get approval from Bayer’s supervisory board.

A New Business

Monsanto was founded in 1901, and it used to produce industrial chemicals and pharmaceuticals. In the past twenty years, the company has pioneered the selling of GMOs. GMO varieties of soybeans and corn account for over 90 percent of all soybean and corn crops in the US.

Buying Monsanto would mean a significant change in Bayer’s portfolio. At the core of its business, Bayer AG is a healthcare company. With Monsanto’s business incorporated into the portfolio, the crop science business would account for roughly have of all the business Bayer does.

Out of a total of group sales of €46.3 billion, Bayer’s agrochemical division accounted for €10.4 billion of revenue last year. Monsanto’s total sales figure for 2015 was $15 billion.

Financial analysts expect Bayer and Monsanto to close on the deal. But some are wondering whether the purchase is going to overcome the many regulations in place. Bayer’s crop chemicals business is the second largest in the world after Syngenta AG. To combine its business with Monsanto’s seed business is a major consolidation move in the agrochemical sector.

 

Image source: Wikipedia.

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