Bayer offers to buy Monsanto for $62 billion cash

Unsolicited bid by Bayer on May 10 was for $122-a-share

The deal could create the world's biggest supplier of seeds and pesticides. (Dan Gill/Polaris)

Bayer made an unsolicited $62 billion all-cash offer to acquire Monsanto to create the world’s biggest supplier of farm chemicals and genetically modified seeds, a proposed acquisition that would be the biggest corporate deal by a German company.

Bayer offered $122 per share in an all-cash bid in a May 10 written proposal, the Leverkusen-based company said in a statement on Monday. That’s a 20 per cent premium to Monsanto’s last close in the US.

The offer will be funded with a combination of debt and equity, with about 25 per cent of the value of the transaction financed primarily through a rights issue.

“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,” Bayer Chief Executive Officer Werner Baumann said in the statement. “Together we would draw on the collective expertise of both companies.”

Buying St. Louis-based Monsanto gives Bayer a company that’s both the world’s largest seed supplier and a pioneer of crop biotechnology.

The kind of genetically modified seeds that Monsanto started to commercialize two decades ago now account for the majority of corn and soybeans grown in the US Monsanto also sells seeds in foreign markets including Latin American and India.

Bayer shares fell 8.2 per cent when the offer was announced without financial details on Thursday, and are down 23 per cent this year.

Role Reversal

The offer marks a reversal of roles for Monsanto. The company previously sought to buy Swiss pesticide maker Syngenta, abandoning the $43.7 billion bid in August after the other company refused to agree to a deal.

The crop and seed industry is being reshaped by a series of large transactions that may end up leaving just a few global players who can offer a comprehensive range of products and services to farmers.

China National Chemical agreed in February to acquire Syngenta for about $43 billion, months after Monsanto abandoned its own bid for Syngenta. Meanwhile DuPont and Dow Chemical plan to merge and then carve out a new crop-science unit.

Bayer expects total synergies from the deal of about $1.5 billion after the third year, the company said.

© 2016 Bloomberg L.P