Bayer's Monsanto Bid Boosted to $65 Billion -- WSJ
July 15 2016 - 03:03AM
Dow Jones News
By Eyk Henning,Jacob Bunge and Christopher Alessi
Bayer AG boosted its takeover offer for Monsanto Co. to about
$65 billion in a bid to overcome the U.S. seed company's resistance
to the tie-up and join a parade of consolidation in the agriculture
industry.
Bayer made the new $125-a-share offer verbally on July 1 and
more formally eight days later, it said in a statement Thursday
confirming an earlier report by The Wall Street Journal. The new
bid represents a $3-a-share bump from an earlier proposal Monsanto
rejected as too low.
Monsanto said its board will review the new offer, but investor
reaction to the news indicated the market is skeptical the increase
will be sufficient to seal the deal for the German life-sciences
company.
Bayer is pursuing what would be the latest in a succession of
multibillion-dollar merger agreements in the $100 billion global
market for agricultural seeds and pesticides, which has struggled
with a slide in crop prices. Dow Chemical Co. and DuPont Co. struck
a merger deal in December, and Switzerland's Syngenta AG -- which
Monsanto unsuccessfully pursued last year -- agreed in February to
a $43 billion takeover by China National Chemical Corp.
A deal would also reshape Bayer itself, making agriculture
roughly half its overall sales, which has rattled some investors
who view the company more as a health-care player than a producer
of crop seeds.
Bayer said it made the new offer after it received additional
information in private discussions with Monsanto. The two companies
had been at loggerheads over Bayer's desire for access to due
diligence, or detailed information about Monsanto's business, which
Monsanto had refused to give in the absence of a higher offer, the
Journal had previously reported.
Bayer is still seeking more information on Monsanto's future
sales prospects and could raise its offer further if it succeeds,
according to a person familiar with the matter.
St. Louis-based Monsanto also had said Bayer's earlier proposal
didn't address potential financing and regulatory risks. Bayer said
Thursday that it has "comprehensively addressed Monsanto's
questions concerning financing and regulatory matters and is
prepared to make certain commitments to regulators, if required, to
complete the proposed acquisition of Monsanto."
Bayer also offered a $1.5 billion reverse-breakup fee should a
deal be blocked on antitrust grounds.
In the statement, Bayer said it "believes that its offer fully
captures the intrinsic value of Monsanto," adding that the new bid
represents a 40% premium to Monsanto's share price in early May,
before the possibility of a deal first surfaced.
Bayer in May offered to buy Monsanto for $62 billion -- a value
that, like the current rough aggregate amount, includes debt.
Some Monsanto investors said they were encouraged by signs of
progress in deal talks with Bayer. But a number of analysts have
said they see Monsanto's fair value in a per-share range of more
like $130 to $140, and some predicted Thursday that the new bid
wouldn't be enough to win over the company.
"Ultimately, it's underwhelming," Piper Jaffray analyst Brett
Wong said of the new offer. "The important aspect of today is that
Bayer is committed to the deal on both a regulatory and financial
standpoint."
Monsanto shares settled 3.1% higher at $104.22 on Thursday, a
price that reflected continued skepticism about the proposed deal
-- given the discount of more than $20 to the latest proposal.
The bid was disclosed after Bayer shares stopped trading in
Germany.
Monsanto Chief Executive Hugh Grant said in late June that while
the company had talked to Bayer about a sale, Monsanto also was
exploring other deal possibilities to deliver the most value to its
shareholders.
Bayer investors have reacted cautiously to the possible deal and
a large share sale that would help pay for it, with the German
company's stock falling when it was originally unveiled. That
likely limits how much Bayer can ultimately offer to pay for its
prey.
Bayer Chief Executive Werner Baumann made the initial bid for
Monsanto just two weeks after assuming the top job and has been
lobbying the German company's investors to support the deal.
"There are a number of investors who would have liked us to
further strengthen our health-care business," Mr. Baumann said in
an interview with the Journal last month. But he argued that
enhancing Bayer's agrochemical division through a deal with
Monsanto now "is the most attractive proposition for the company
and for shareholders."
Former Bayer Chief Executive Marijn Dekkers had presided over
the launch of five new blockbuster drugs and the $14.2 billion
acquisition of Merck & Co.'s over-the-counter drug business.
Mr. Dekkers also spun off the company's specialty-plastics
business.
Mr. Baumann had first proposed the idea of a Monsanto takeover
last year when he was running strategy for Bayer, but the move was
strongly opposed by Mr. Dekkers, people familiar with the matter
have said.
Natalia Drozdiak
contributed to this article.
Write to Eyk Henning at eyk.henning@wsj.com, Jacob Bunge at
jacob.bunge@wsj.com and Christopher Alessi at
christopher.alessi@wsj.com
(END) Dow Jones Newswires
July 15, 2016 02:48 ET (06:48 GMT)
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