Bayer officials issued a release early June 4 announcing that the company plans on closing on the Monsanto acquisition June 7. The news comes as the company received all required approvals for regulatory authorities over the weekend.
In a statement, Werner Baumann, chairman of the board of management at Bayer AG, commented that the acquisition is a "strategic milestone in strengthening our portfolio of leading businesses in health and nutrition. We will double the size of our agriculture business and create a leading innovation engine in agriculture, positioning us to better serve our customers and unlock the long-term growth potential in the sector."
Bayer originally announced its intention to acquire the St. Louis biotech giant Monsanto in May 2016, and signed the agreement for the company at $128 per share in September 2016. That cost puts the closing price for Monsanto at $63 billion taking into account Monsanto's outstanding debt as of Feb. 26, according to Bayer.
In connection with what Bayer stated is a "comprehensive regulatory approval process" Bayer has agreed to divest businesses which generated $2.58 billion in sales in 2017 for an aggregate base purchase price of $8.9 billion. Rolling in Monsanto, and taking the divestitures into account, the health and agriculture businesses would have been roughly equal in size in2017, with total pro forma sales of $52.7 billion including combined Crop Science sales of around 20 billion euros. In 2017, both companies employed about 115,000 people, accounting for the divestitures, Bayer stated.
In the announcement, Bayer said the acquisition is anticipated to generate "significant value." Bayer expects a positive contribution to core earnings per share starting in 2019. From 2021 onward, that contribution is expected to be a "double-digit" percentage, Bayer stated. Adjusted for divestments, Bayer expects synergies - or cost benefits - to deliver annual contributions of $1.2 billion to earnings before interest, taxes, depreciation and amortization before special items by 2022.
To buy Monsanto, Bayer secured initial bridge financing of $57 billion. As announced September 2016, this 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 announced June 3.
Bayer will become the sole shareholder of Monsanto on June 7. Bayer noted that according to the conditional approval from the U.S. Department of Justice, the integration of Monsanto into Bayer can take place as soon as the divestments to BASF have been completed. This is expected to take two months.
Added Baumann: "We have diligently prepared for the upcoming integration over the past two years. Our extensive experience in integrating other larger companies has proven that we can and will be successful."
Bayer will remain the company name. Monsanto will no longer be a company name. The acquired products will retain their brand names and become part of the Bayer portfolio.
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Liam Condon, Bayer board member and president of the Crop Science Division, stated that "innovation is vital to produce more healthy, safe and affordable food for a growing population in a more sustainable manner. The combination of the two businesses will allow us to deliver more innovation faster and provide solutions tailored to the needs of farmers around the world."
He added that going forward the teams in the labs and in the fields will be able to "take a much more holistic approach to innovation as we address the enormous challenges we face in agriculture."
Including Monsanto and taking the divestitures into account, the total research and development investment of Bayer in 2017 would have been nearly $6.7 billion. Of that $2.8 billion would have been spent in the combined agriculture business on a pro forma basis.
In the statement, Bayer also noted that as a company its leadership is fully aware of the "heightened responsibility that a leadership position in agriculture entails. The company will continue to further strengthen its commitment in the area of sustainability."
Added Baumann: "We will apply the same rigor to achieving our sustainability targets as we do to our financial targets."
He also noted that the company is working to enhance stakeholder engagement added that "we aim to deepen our dialogue with society. We will listen to our critics and work together where we find common ground. Agriculture is too important to allow ideological differences to bring progress to a standstill. We have to talk to each other. We need to listen to each other. It’s the only way to build bridges.”