P&L Check

Bayer Still Has Convincing to Do

  • Why it matters

    Why it matters

    Bayer CEO Werner Baumann has been struggling to justify the Monsanto acquisition to worried investors as he lays the financial groundwork to complete the largest takeover ever attempted by a German company.

  • Facts

    Facts

    • The German pharmaceutical giant Bayer agreed last year to buy the American agrichemical company Monsanto in an all-cash deal worth around €60 billion.
    • Bayer’s earnings before interest and taxes (EBIT) rose by 13 percent in 2016 to €7 billion, bringing net income up to €4.5 billion. Minus one-off costs, the company’s operating income rose by 15 percent.
    • On Thursday, Bayer raised its future forecast, saying it expected earnings before interest, tax, depreciation and amortization (EBITDA) to rise by more than 10 percent.
  • Audio

    Audio

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Bayer in Leverkusen
Can Bayer really absorb the US agrochemicals giant? Source: DPA

When German pharmaceutical giant Bayer moved to acquire US agrochemical company Monsanto last year, marking the largest takeover effort ever undertaken by a German company, many of Bayer’s shareholders were highly critical. The acquisition, after all, cost Bayer $66 billion (€60.6 billion), a price some shareholders deemed too steep, and many feared the deal would cause Bayer to neglect its pharmaceutical business.

Seven months after the takeover deal was announced, on Friday, Bayer Chief Executive Werner Baumann appeared for the first time to answer directly before shareholders about the all-cash deal.

It’s a proving a tough sell. Prior to the acquisition announcement, many German investors knew Monsanto only as one of the most disliked companies in the world, notorious for its aggressive business practices and its controversial genetic engineering – something that Europeans in particular still remain deeply skeptical about. And while many investors understand the logic behind Bayer’s push to become the world’s largest player in the agrochemical industry, others remain wary of the deal – and what it might do to Bayer’s own bottom line.

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