Reuters — German drug and crop chemical maker Bayer clinched a $66 billion takeover of U.S. seeds company Monsanto on Wednesday, ending months of wrangling with a third sweetened offer that marks the largest all-cash deal on record.
The $128-a-share deal, up from Bayer’s previous offer of $127.50 a share, has emerged as the signature deal in a consolidation race that has roiled the agribusiness sector in recent years, due to shifting weather patterns, intense competition in grain exports and a souring global farm economy.
Grain prices are hovering near their lowest levels in years amid a global supply glut, and farm incomes have plunged.
Competition authorities are likely to scrutinize the tie-up closely, and some of Bayer’s own shareholders have been highly critical of a takeover that they say risks overpaying and neglecting the company’s pharmaceutical business.
If the deal closes, it will create a company commanding more than a quarter of the combined world market for seeds and pesticides in the fast-consolidating farm supplies industry.
Bernstein Research analysts said on Tuesday they saw only a 50 percent chance of the deal winning regulatory clearance, although they cited a survey among investors that put the likelihood at 70 percent on average.
The German company is aiming to create a one-stop shop for seeds, crop chemicals and computer-aided services to farmers. That was also the idea behind Monsanto’s swoop on Syngenta last year, which the Swiss company fended off, only to agree later to a takeover by China’s state-owned ChemChina. U.S. chemicals giants Dow Chemical and DuPont plan to merge and later spin off their respective seeds and crop chemicals operations into a major agribusiness.
And on Tuesday, Canadian fertilizer producers Potash Corp of Saskatchewan Inc and Agrium Inc agreed to combine to navigate a severe industry slump, but the new company’s potential pricing power may attract tough regulatory scrutiny. The Bayer-Monsanto deal will be the largest ever involving a German buyer, beating Daimler’s tie-up with Chrysler in 1998, which valued the U.S. carmaker at more than $40 billion. It will also be the largest all-cash transaction on record, ahead of brewer InBev’s $60.4 billion offer for Anheuser-Busch in 2008.
Antitrust experts have said regulators will likely demand the sale of some soybeans, cotton and canola seed assets.
Bayer said BofA Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan had committed to providing the bridge financing.
BofA Merrill Lynch and Credit Suisse are acting as lead financial advisers to Bayer, with Rothschild as an additional adviser. Bayer’s legal advisers are Sullivan & Cromwell LLP and Allen & Overy LLP.
Morgan Stanley and Ducera Partners are acting as financial advisers to Monsanto, with Wachtell, Lipton, Rosen & Katz its legal adviser.
Monsanto, the world’s largest seed producer, reaped huge profits from selling its popular weedkiller, glyphosate (known as “Roundup”) in tandem with crops genetically engineered to withstand glyphosate (known as “Roundup Ready” crops). But thanks in part to improper use, more and more weeds in the United States are developing resistance to glyphosate — and Monsanto is racing to find a replacement. The company is currently investing $1 billion to develop crops resistant to dicamba, another herbicide, but a merger would help it maintain market share in the meantime.
The impending merger has caused strong reaction from farmers in the US who are concerned about an agricultural landscape dominated by just a handful of giant companies. If firms can corner key markets in seeds and chemicals, they might be able to raise prices of their products on farmers, which in turn could make food more expensive. Groups like the US National Farmers Union have been opposing many of these deals.
In Europe, Monsanto is at odds with leading member states including France and Germany which refused to extend a licence for glyphosate responding to growing public concern that the weedkiller could cause cancer. Last month however a report from the WHO and the UN’s Food and Agricultural Organisation concluded that the chemical was “unlikely to pose a carcinogenic risk” through diet
Some farmers argue that glyphosate, which is the basis for Monsanto’s topselling weedkiller RoundUp, is vital for robust yields of crops, ranging from barley to pears.
