The sheer size of the deal has unnerved investors with a major shareholder saying this is a brazen act of “arrogant empire-building”. However if the deal goes through, it would become the world’s largest supplier of agriculture related products.
Germany’s biggest drug and chemical manufacturer Bayer AG has disclosed that it has made an offer to acquire U.S seed and fertilizer giant Monsanto Co for $62 billion which includes debt. If the merger goes through, it would create the world’s biggest agricultural supplier.
Bayer has said that its proposal represents a 37% premium on the closing price of Monsanto’s shares as of May 9.
Last week Monsanto had disclosed that it had received an unsolicited takeover bid by the German group, which triggered a backlash among shareholders of the German company, with one major shareholder terming the move as “arrogant empire-building”.
On its part, Bayer has disclosed it plans on financing the deal through a combination of equity and debt, including a rights offer. Equity will account for a quarter of the value of the deal.
Bayer expects its annual earnings contribution to rise by $1.5 billion after three years of the completion of this deal. Additionally, the deal could also provide benefits due to increased integration of development and sales of seeds and chemicals for crop protection.
“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, Bayer’s CEO in a statement.
With Bayer coming out in the open with this deal, its shares slipped further by 1.7% in pre-market trading. Last week it had fallen by 7%.
Bayer’s offer price of $122 per shares, has valued Monsanto at 15.8 times its 12-month earnings before interest, tax, depreciation and amortization (EBITDA) as of Feb. 29.
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