German drugs and crop chemicals company Bayer has won over USA seeds firm Monsanto with an improved takeover offer of $66 billion including debt, ending months of wrangling after increasing its bid for a third time.
Bayer also will pay a $2 billion breakup fee to Monsanto if this deal is rejected due to antitrust problems.
German drug and farm chemical company Bayer AG says it has signed a deal to acquire seed and weed-killer company Monsanto for $66 billion in cash. The combined business will benefit from Monsanto's leadership in Seeds & Traits and Climate Corporation platform along with Bayer's broad Crop Protection product line across a comprehensive range of indications and crops in all key geographies. If all these deals close, three companies would control almost 70 percent of the world's pesticide market and 80 percent of the USA corn-seed market.
The Wall Street Journal said the deal heavily tilts Bayer "toward agriculture in a long-range bet on high-tech crops to sustain a growing global population", but also spotlights a sagging USA farm economy that "shows few signs of rebounding as US farmers prepare to reap another record corn and soybean crop this autumn".
In an interview with FOX Business Network's Countdown to the Closing Bell, Bayer CEO Werner Baumann and Monsanto CEO Hugh Grant weighed in on why this deal is beneficial to shareholders and farmers.
Dow Chemical and DuPont are also trying to merge, prompting concerns that the whole industry could become less competitive, and make seeds too expensive for farmers: That would affect consumer prices, because farmers would have to compensate for the higher cost of buying seeds.
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The $128-a-share purchase price comes in below some analysts' earlier projections of a deal at around $135 a share.
Bayer said it would raise the cash to pay for Monsanto by issuing debt and $19 billion in equity, including a mandatory convertible bond and a rights issue.
It is the largest ever takeover by a German company.
That was also the idea behind Monsanto's swoop on Syngenta previous year, which the Swiss company fended off, only to agree later to a takeover by China's state-owned ChemChina. Monsanto-Bayer would have 28 percent. "So it's the old story, we supply what the markets is looking for so I am optimistic also and I think we will have a fair shake with regulators as they look at the opportunities that this transaction represents", he said. "I am convinced that Monsanto will flourish as part of one of the most respected and trusted companies in the world", said Baumann. With the current monopoly enjoyed by Monsanto over seeds of this type, this could be the one silver lining of this massive corporate merge. For example, a merger between DuPont and Dow Chemical that was agreed upon in December of past year is unlikely to close until early 2017 after the European Commission started an investigation. Bayer's legal advisers are Sullivan & Cromwell and Allen & Overy.
Morgan Stanley and Ducera Partners are financial advisers to Monsanto, with Wachtell, Lipton, Rosen & Katz its legal adviser.