After months of negotiation, Bayer and Monsanto have signed a definitive merger agreement which, if approved by competition authorities, will see Bayer acquire Monsanto for $66 billion in cash. The boards of both companies have unanimously approved the agreement, which will see Bayer pay a 44 per cent premium on Monsanto’s share price the day before the announcement.
“We are pleased to announce the combination of our two great organizations,” said Werner Baumann, CEO of Bayer AG. “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.”
His counterpart, Hugh Grant, Chairman and Chief Executive Officer of Monsanto, added, “Today’s announcement is a testament to everything we’ve achieved and the value that we have created for our stakeholders at Monsanto. We believe that this combination with Bayer represents the most compelling value for our shareowners, with the most certainty through the all-cash consideration.”
Bayer argues that the two companies will provide a good fit, with Monsanto’s strength in seeds, crop traits and herbicides complementing Bayer’s crop protection activities. “The agriculture industry is at the heart of one of the greatest challenges of our time: how to feed an additional 3 billion people in the world by 2050 in an environmentally sustainable way,” said Liam Condon, member of the Board of Management of Bayer AG and head of the Crop Science Division. “It has been both companies’ belief that this challenge requires a new approach that more systematically integrates expertise across Seeds, Traits and Crop Protection including Biologicals with a deep commitment to innovation and sustainable agriculture practices.”
If the merger goes ahead it will create the largest global pesticide and seed company, although some commentators have cautioned that Bayer may not find its marriage to Monsanto easy, and that investors may still be concerned by under performance in Bayer’s pharmaceutical business.
Professor John Colley of the Warwick Business School warned; “Bayer’s acquisition of ‘Frankenstein’ crop producer Monsanto could be a horror story for both Bayer and its customers: the farmers. Apart from Monsanto’s shareholders, who have hit the jackpot, this looks like a lose-lose bid. Bayer have been forced into paying too much and face major integration and competition authority risks.
“Farmers will lose out as product ranges are rationalised and attempts are made to increase prices. Bayer may have won the bid now, but could regret the move at their leisure.”