Bayer Completes $63-Billion Acquisition of Monsanto

By Patricia Van Arnum - DCAT Editorial Director

June 8, 2018

Bayer has completed its $63-billion acquisition of Monsanto, an agrochemical and seed company, ending a two-year effort to acquire the company and marking the largest acquisition in Bayer’s history. It is also cements Bayer's strategic shift to become a pure-play life-sciences company focused on pharmaceuticals, crop science, consumer healthcare, and animal health. With the acquisition, the crop-science business will now be the largest piece of Bayer by revenue, eclipsing its pharmaceutical business, which accounted for nearly 50% of the company’s sales in 2017.

Bayer first announced its intention to acquire Monsanto in May 2016 and formally announced the deal in September 2016. Bayer will remain the company name. Monsanto will no longer be a company name. The acquired Monsanto products will retain their brand names and become part of the Bayer portfolio. According to the conditional approval from the US Department of Justice, the integration of Monsanto into Bayer can take place as soon as divestments of certain crop-protection assets to BASF have been completed. Bayer says that this integration process is expected to begin in approximately two months.

Shares in Monsanto will no longer be traded on the New York Stock Exchange, with Bayer now the sole owner of Monsanto. Monsanto shareholders are being paid $128 per share, which now corresponds to a total cost of approximately $63 billion, which takes into account Monsanto’s debt outstanding as of February 28, 2018. Bayer expects synergies to deliver annual contributions of $1.2 billion, adjusted for divestments. To acquire Monsanto, Bayer secured initial bridge financing of $57 billion, which is being refinanced by a combination of equity and debt transactions, some of which have already been completed. The final equity measure is a rights issue.

Including Monsanto and taking the divestitures into account, Bayer's health and agriculture businesses will have total pro forma sales of around EUR 45 billion ($53 billion), including combined sales of the crop-science business of around EUR 20 billion ($23 billion). In 2017, both companies together employed approximately 115,000 people, accounting for the divestments.

With the acquisition of Monsanto, Bayer’s crop-sciences business will be the largest piece of Bayer by sales, surpassing its pharmaceutical business, which accounted for nearly 50% of the company’s sales in 2017. In 2017, Bayer had total sales of EUR 35.015 billion ($41.180 billion) with pharmaceuticals accounting for EUR 16.847 billion, or 48% of sales. Sales of the crop-science business were EUR 9.577 billion ($11.250 billion), and sales of its consumer-healthcare business were EUR 5.862 billion ($6.887 billion). Sales of its animal-health business were EUR 1.571 billion ($1.848 billion).

Bayer's focus on life sciences is being led by Werner Baumann, who became chairman of the board of management of Bayer AG on May 1, 2016. Bayer took on a new corporate structure in January 2016 with three divisions: pharmaceuticals, consumer healthcare, and crop science, and a separate business unit, animal health. Bayer's former material-science subgroup, renamed Covestro, became legally and economically independent in September 2015, and Covestro AG was floated on the stock market in October 2015. In 2017, Bayer reduced its direct interest in Covestro from 64.2% to 24.6%.

Liam Condon, member of the Bayer Board of Management, will lead the combined Crop Science Division when the integration begins. Until that time, Monsanto will operate independently from Bayer.

Source: Bayer