Monsanto Offer

Bayer’s $62-Billion Big Bet

Bayer's CEO Werner Baumann, in office since May 1, moved quickly to announce the $62-billion offer for rival Monsanto.
  • Why it matters

    Why it matters

    Buying Monsanto would turn Bayer into the world’s largest maker of seeds and pesticides and almost quadruple its debt level.

  • Facts


    • Bayer, Germany’s largest pharmaceutical firm, offered $62 billion in cash to buy Monsanto, the world’s largest producer of seeds and pesticides.
    • The company, based in Leverkusen, plans to issue around $15.5 billion in new equity and fund the remaining $46.5 billion by issuing debt.
    • Bayer had €16.3 billion, or $18.3 billion, in net debt as of March 31.
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After only 10 days on the job, Bayer’s new Chief Executive Werner Baumann sent a letter in early May to Hugh Grant, the CEO of Monsanto, announcing his intention to buy the U.S. agrochemicals firm for $62 billion, or €55.2 billion.

It was a bold move by Mr. Baumann, who knows Bayer well, having been its head of strategy from 2014, and before that as its chief financial officer.

Bayer, Germany’s largest pharmaceuticals group, on Monday confirmed details of the offer to acquire the world’s largest maker of seeds and pesticides. But investors were not so persuaded by the wisdom of the deal or the price as Mr. Baumann was. Bayer’s shares fell 2.8 percent to €87 ($97), touching a two-and-a-half year low.

“Few megabids go well and research shows more than half destroy value, and only around a quarter deliver on their promises.”

John Colley, Professor, Warwick Business School

The German chemicals and pharmaceutical company’s stock has fallen 13 percent since May 12, when the first report emerged of Bayer’s interest in Monsanto, which is based in St. Louis.

“It is a classic transfer of value from the bidder’s shareholders to those of the target,” John Colley, a business professor at Warwick Business School in Britain, said in a note on Monday. “Few megabids go well and research shows more than half destroy value, and only around a quarter deliver on their promises.”

Mr. Colley cited Daimler’s takeover of rival carmaker Chrysler in 1998, a $38.6-billion deal which was unwound a couple of years later as the maker of Mercedes cars failed to integrate the operations into one business.

Bayer’s bid comes months after the announced merger of U.S. rivals Dow Chemical and DuPont, and ChemChina’s $43-billion bid to buy Swiss seeds maker Syngenta.


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Investors worry Bayer might overstretch itself and take on too much debt with Monsanto. The firm said it would fund the takeover offer, the largest ever by a German company, by issuing new shares with a value of up to €13.8 billion, or $15.5 billion, and a debt issue of up to $46.5 billion.

The Bayer bid is worth $122 for each share of Monsanto. The total offer of $62 billion includes the assumption of about $8 billion in Monsanto debt, putting the purchase price of Monsanto excluding debt at roughly $54 billion, or €48 billion.

Bayer had €16.3 billion of net debt outstanding at the end of March and this figure would almost quadruple to an estimated $64.8 billion after the Monsanto purchase.

Mr. Baumann said that Bayer had a “disciplined approach” to reduce debt after the takeover and cited previous phases of reducing outstanding loans after large takeovers, for instance the $14-billion deal to buy Merck’s over-the-counter drugs business in 2014.

When Bayer officially announced its interest in Monsanto last Thursday, it did not announce financial details and its shares fell as much as 8 percent.

“What we saw last week was an uneducated reaction in the media and the press because we did not communicate the details of our proposal,” Mr. Baumann said on a conference call on Monday, according to Bloomberg. “We are utterly convinced of the rationale” of the proposal, he added.


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The purchase price of $62 billion, which compares with Bayer’s market value of around $80.7 billion, might also rise further if Monsanto were to negotiate a better deal. “The offer is rather high, considering that this is only the first attempt,” said a stock trader, who declined to be named.

A bidding war might even emerge if German rival BASF offers to buy Monsanto.

BASF, the world’s largest chemicals firms, may also be considering an offer for Monsanto, according to one media report earlier this month. The Ludwigshafen-based company is working with investment banks to advise on a potential bid, U.S. financial news website Street Insider reported.

BASF has declined to comment on the speculation. BASF’s shares were unchanged at €67.08 in Frankfurt.

Mr. Baumann said combining Bayer and Monsanto offered the chance to merge the companies’ seeds and crop protection products and complement and streamline their global operations.


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When asked on the conference call whether Bayer might consider splitting operations, for instance breaking off its pharmaceutical products, Mr. Baumann said the new company would focus on “human, animal and plant health” and that it was “the best owner” of the activities.

Bayer has been buying and divesting assets for the past decade to focus on what it calls life sciences: Making drugs and plant protection products. Last year, it listed its plastics chemicals unit Covestro and it spun off its synthetic rubber operations Lanxess in 2005.

U.S. rivals Dow Chemical and DuPont are merging to create three new firms, one focusing on chemicals, the second on specialty chemicals and the third on seeds and pesticides.

If the deal succeeds, investment bankers will fetch a sum of more than €100 million in commissions and fees thanks to issuances of debt and shares, people familiar with the deal told Handelsblatt.

BofA Merrill Lynch and Credit Suisse are Bayer’s lead financial advisors and will support the deal’s financing, Bayer said. It will also receive advice from the financial firm Rothschild Group and legal advice from Sullivan & Cromwell LLP and Allen & Overy.


Gilbert Kreijger is an editor with Handelsblatt Global Edition in Berlin, focussing on companies andmarkets. Siegfried Hofmann writes about companies and markets for Handelsblatt. To contact the authors: and

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