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Bayer plans to complete Monsanto takeover by end of year

Tashatuvango/ThinkstockPhotos Earnings wordcloud
Bayer earnings climbed 14% last quarter.

by Johannes Koch

Bayer AG signaled that its $66 billion takeover of Monsanto Co. may face delays, with regulators pressing for more information, even as it reiterated plans to complete the transaction by the end of the year.

The German drugmaker will only seek approval for the transaction in the European Union next quarter after regulators there requested more information, Chief Executive Officer Werner Baumann said at a meeting in Leverkusen, Germany, on Wednesday. The target timing was previously the first quarter. The company is also responding to a second request from the U.S. Department of Justice, he said.

Bayer shares fell as much as 3.9% on concern about setbacks. The German company aims to pull off the biggest, most transformative deal of its 152-year history in 2017 as it attempts to meld its own pesticides with Monsanto’s seeds and herbicides. It must also refinance much of a $57 billion bridge loan.

“We are totally in line with our original planning,” Baumann said in a Bloomberg Television interview with Francine Lacqua and Tom Keene.

Bayer, which reported earnings Wednesday, also said it’s filed to win approval for the Monsanto transaction from the Committee on Foreign Investment in the U.S.

The earnings report shows the crops and consumer-care units failed to boost profit last quarter, leaving prescription drugs as the sole engine of growth. Demand for medicines such as the blood thinner Xarelto and the eye treatment Eylea boosted sales and profit. The stock fell 1.7% to 107.05 euros at 1:48 p.m. in Frankfurt trading. 

Earnings before interest, taxes, depreciation and amortization, and excluding some costs, climbed 14% to about 2.2 billion euros ($2.29 billion) last quarter, the company said in a statement.

Crops Revival?
Unlike Bayer’s, Monsanto’s agriculture business reported positive earnings last month, pointing to a possible turnaround in the industry. Last year, falling crop prices and a quest for greater efficiency triggered a cascade of deals in the industry. DuPont Co. and Dow Chemical Co. await regulatory approval for their planned union, as do China National Chemical Corp. and Switzerland’s Syngenta AG.

Bayer will pay for Monsanto by issuing bonds, and a planned rights offering will likely take place in the second half, Chief Financial Officer Johannes Dietsch said in an interview. Proceeds from a reduction in the company’s stake in its plastics unit Covestro could help pay down debt, he said. Ebitda before special items will probably grow by a mid-single-digit percentage this year, the company said as it reported earnings, reprising the forecast issued a year ago. The increase will be about the same in earnings per share.

2017 marks Baumann’s first full year at the helm. In addition to delivering on the Monsanto takeover to bolster the agriculture business, Baumann, 54, must revive growth at the consumer-health division, which sells over-the-counter products such as aspirin. The unit’s earnings dropped last year, stoking concern about brands like Coppertone and Claritin, bought from Merck & Co. in 2014. 

--With assistance from Naomi Kresge.

To contact the reporter on this story: Johannes Koch in Berlin at [email protected]

To contact the editors responsible for this story: Chitra Somayaji at [email protected]

Marthe Fourcade

© 2017 Bloomberg L.P

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