Bayer Makes First Move for Monsanto Takeover With $62 Billion Bid
Over the past few weeks, there has been intense speculation in the business pages about the impending merger between German major Bayer and American agrochemical and associated biotechnology company Monsanto and rightly so due to the possibility of creating the largest agricultural supplier on a global level. There have been talks about the merger for some time and last week Monsanto decided to issue a statement on the issue, stating that it Bayer had in fact placed a bid. However, Bayer have finally made their bid official with an offer of a whopping $64 billion for the American company that would be made entirely in cash with a blend of debt as well as equities.
According to the reports, Bayern have prepared a deal according to which it will pay Monsanto, $122 for each share and that takes into account a 37% premium on the price of the share as on the 9th of May, 2016. However, something that has without doubt made the whole deal a great one for Monsanto is the fact that Bayer's bid will also wipe out the total of $9 billion in debts that the American company has on its books. However, Bayer's shareholders do not seem to be too happy with the whole thing sicne $15 billion is going to be raised from shareholders and as a result the shares of the company has falled 13% over the past two weeks. Werner Baumann, CEO of Bayer had this to say about the impending deal, "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."
Deals of such size often prove detrimental for further development and as such, a Professor at the Warwick School of Business named John Colley echoed the same thoughts, "This is an enormous offer in a number of ways. German businesses have generally avoided megabids, opting instead for lower risk but slower organic growth. Bayer has dispensed with that approach," he said. "It is a classic transfer of value from the bidder's shareholders to those of the target. Few megabids go well and research shows more than half destroy value. Only around a quarter deliver on their promises."
