FRANKFURT—Bayer AG Chief Executive Werner Baumann just pulled
off the deal of his career.
Now, less than five months in as CEO, his career could hinge on
his ability to close the $57 billion acquisition of Monsanto Co.
agreed Wednesday and make the combination pay for investors.
Mr. Baumann, a 28 year Bayer veteran who has been described by
colleagues as fastidious and single-minded, spent the summer
relentlessly pursuing Monsanto to create the world's biggest seed
and pesticide business.
Bayer's initial $122-per-share bid for Monsanto came barely two
weeks after Mr. Baumann took over the corner office in early May.
It shook up a global agrochemical industry already astir with
mergers and acquisitions.
Mr. Bauman, 53 years old, closed the deal by raising his offer
only about 5% above that first bid, further surprising—and
pleasing—many investors. Some had predicted Bayer could need to
raise its offer as high as $135 a share to satisfy Monsanto's
board.
Bayer and Monsanto said the German firm would pay $128 a
Monsanto share. The deal including debt is valued at $66
billion.
"This is not about individuals," Mr. Baumann said in an email
Thursday. He said Bayer's "focus has always been and will be in the
future" on helping growers world-wide "produce safe, nutritious and
affordable food for all of us."
Still, investors were generally positive about Mr. Baumann's
apparent coolheadedness during the protracted talks with
Monsanto.
"So far, he's proven to be a good negotiator. He's been quite
efficient," said Fabrice Theveneau, head of global equities at
Paris-based Lyxor Asset Management, a Bayer investor.
Markus Manns, a portfolio manager at Union Investment, another
Bayer shareholder, said Mr. Baumann had shown investors he wouldn't
spend heedlessly to complete a deal. "I'm a little bit more
optimistic," he said.
"What is smart is the financing," Mr. Theveneau added.
He said Mr. Baumann had taken advantage of access to debt at
very low interest rates to largely pay for the deal, which would
allow the acquisition to quickly enhance earnings.
Mr. Bauman in the past served as Bayer's chief financial
officer.
Bayer said Wednesday it expected the deal to boost earnings per
share by double digit percentages in the third full year. The
company is financing the deal through a combination of equity and
debt, with $57 billion in bridge financing committed by five banks,
including BofA Merrill Lynch and Credit Suisse.
"At the same time, it's a big bet," Mr. Theveneau cautioned.
He cited uncertainty over whether the deal would pass regulatory
muster from roughly 30 agencies around the world, as well as the
high fee of $2 billion that Mr. Baumann agreed to pay Monsanto if
the deal falls through.
"Just closing the deal is not a sign of success," said Nils
Stieglitz, a professor at the Frankfurt School of Finance and
Management. "It's going to really depend on whether he can turn
this acquisition into a [reality]."
Prof. Stieglitz said that while he had "doubts" about whether
the deal would ultimately succeed, he said that it was "not
reckless," as some investors have charged.
Analysts have widely said Bayer's crop science business, a
leader in crop protection chemicals, is complementary with
Monsanto, which is a world leader in seeds.
Prof. Stieglitz said Mr. Baumann's background as finance chief
is emblematic of a "new breed" of German CEOs. Ten years ago, he
said, less than 10% of German chief executives had experience in
financial functions, highlighting the relatively lesser importance
of capital markets for German corporates at that time. Past CEOs
were more likely to have science or engineering backgrounds, he
said.
Mr. Baumann started his career in Bayer's finance department,
rose to CFO and most recently served as strategy chief.
In that role, he had long been contemplating a bid for
Monsanto—a move at odds with his predecessor, Marijn Dekkers, who
had built up the company's health-care operations.
Mr. Baumann started developing plans for a Monsanto takeover
after the U.S. company's failed $46 billion bid for Syngenta AG of
Switzerland last year, according to two people familiar with
internal deliberations. Mr. Dekkers at that point strongly opposed
the idea, one of these people has said.
By the time, Mr. Baumann was able to put the wheels in motion
for a Monsanto takeover—the moment Mr. Dekkers departed—the
agrochemical landscape was already in the midst of rapid
consolidation and Mr. Baumann knew he had to act quickly, he said
later.
Rival seed developers Syngenta, Dow Chemical Co. and DuPont Co.
have all recently struck deals, which could make seeking regulatory
approval even more complicated, experts say.
"As one of the major players in the industry, it has always been
clear that we needed to take a position," he said in an interview
earlier in the summer.
Write to Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
September 16, 2016 04:15 ET (08:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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