Bayer, Monsanto Come to Terms

OMAHA (DTN) -- Bayer and Monsanto announced early Wednesday they had come to terms on a merger with Bayer acquiring Monsanto for $128 a share in an all-cash transaction.

The boards for both companies unanimously approved the agreement.

With Monsanto's 442 million outstanding shares, the $128-a-share deal equates to $56.6 billion in cash for shareholders, but Monsanto also reported $9.3 billion in debt. That puts the deal value at just under $66 billion.

"We are pleased to announce the combination of our two great organizations," said Werner Baumann, CEO of Bayer AG, in a news release. "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."

The Germany-based Bayer initially offered $122 a share in May and came back with a $125 a share offer in July. Last week, Bayer increased the offer to $127.50.

Bayer operates in several industries, but Monsanto is largely an agricultural company. Combined agricultural sales last year from the two companies equaled roughly $25.8 billion.

Bayer also noted that once the transaction is completed and the two companies are combined "synergies" over the next three years would lead to roughly $1.5 billion in savings.

The deal announced Wednesday will add significant scrutiny to rapid merger and consolidation moves in the seed, biotechnology and chemical industries. Bayer-Monsanto's deal follows the Dow-DuPont merger announced at the end of 2015 and the ChemChina purchase of Syngenta announced earlier this year. Effectively, with BASF on the outside looking in, the "Big Six" ag seed-and-chemical companies will quickly become the "Big Four."

Bayer noted in its news release that the sale closing would be at the end of 2017. However, if the sale is squashed by regulators in the U.S. or Europe, Bayer has committed to a $2 billion breakup fee.

The U.S. Department of Justice has remained quiet on the seed-and-chemical mergers, but the U.S. Senate Judiciary Committee has a hearing scheduled for next week on the topic.

Bayer stated the merger "brings together two different, but highly complementary businesses." Monsanto's work in seed, traits and climate technology will marry with Bayer's crop protection products across a variety of crops and key growing areas around the world. The result, the companies stated, is that "growers will benefit from a broad set of solutions to meet their current and future needs, including enhanced solutions in seeds and traits, digital agriculture, and crop protection."

Additionally, the merged company will combine a research and development budget of roughly $2.8 billion. Bayer said the companies will be able to "accelerate innovation" and provide farmers with more optimal analytics and agronomy solutions to improve yields and sustainability.

"We are entering a new era in agriculture -- one with significant challenges that demand new, sustainable solutions and technologies to enable growers to produce more with less. This combination with Bayer will deliver just that -- an innovation engine that pairs Bayer's crop protection portfolio with our world-class seeds and traits and digital agriculture tools to help growers overcome the obstacles of tomorrow. Together Monsanto and Bayer will build on our proud tradition and respective track records of innovation in the agriculture industry, delivering a more comprehensive and broader set of solutions to growers," said Hugh Grant, president and CEO of Monsanto.

Chris Clayton can be reached at Chris.Clayton@dtn.com.

Follow him on Twitter @ChrisClaytonDTN.

(CZ)

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