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Bayer’s $62 bn buyout bid for Monsanto triggers open offer rally in Indian listed arm

24 May, 2016

German pharmaceutical and chemicals giant Bayer AG has made a $62 billion offer to buy US-based seed conglomerate Monsanto Co, in one of the largest takeover bids by a German firm and the biggest all-cash acquisition offer on record.

Drugs and crop chemicals group Bayer, which is best known for its life sciences business that includes products like Aspirin, Alka-Seltzer, Claritin, Coppertone Sunscreen and Xarelto, has offered to pay $122 a share in cash. The proposed deal includes an assumption of $8 billion in debt.

Monsanto is the world’s biggest manufacturer of genetically modified crop seeds. The combination of two companies, with $67 billion in sales, would produce an array of products including pain medication, genetically modified organism (GMO) seeds and pesticides.

“The acquisition of Monsanto would be a compelling opportunity to create a global agriculture leader, while reinforcing Bayer as a life sciences company with a deepened position in a long-term growth industry,” Bayer said in a statement.

The all-cash offer would probably require Bayer to take on additional debt, as well as issue new stock that would dilute existing shareholders.

Bayer said it is “confident” in its ability to raise the money after having consulted with its lenders, Bank of America Merrill Lynch and Credit Suisse.

In a separate statement, Monsanto said its board is reviewing the proposal. Last week, the two companies confirmed that an approach had been made.

In August last year, Monsanto had abandoned its takeover bid for competitor Syngenta AG after the Swiss chemicals producer rejected its offer worth nearly $47 billion. A combination with Syngenta would have made Monsanto the world’s largest producer of farming chemicals, on top of its market-leading seed business.

Monsanto and Bayer have been operating in India for some time. While Monsanto India focuses on Bt Cotton, maize and agri products, Bayer CropScience sells seeds, crop protection and non-agricultural pest control products.

Bayer’s global offer for Monsanto will trigger a mandatory open offer by the German firm in India. Monsanto India scrip has been climbing for over month. For the last two weeks alone, it has surged over 30%. On Tuesday, it rose 2.7% to touch Rs 2,135.25 a share on BSE

If the deal goes through, it has to be approved by Indian authorities, including the Competition Commission of India (CCI) and stock exchanges.

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Bayer’s $62 bn buyout bid for Monsanto triggers open offer rally in Indian listed arm

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