German chemical firm Bayer makes $62-billion offer for Monsanto

Reporting from Berlin —  German drug and chemicals company Bayer AG announced Monday that it has made a $62-billion offer to buy U.S.-based crops and seeds specialist Monsanto.

The proposed combination would create a giant seed and farm chemical company with a strong presence in the U.S., Europe and Asia.

Bayer said the all-cash offer values shares of Monsanto at $122 each. That compares with a closing price Friday of $101.52 and is 37% higher than the closing price of $89.03 on May 9, the day before Bayer made a written proposal to Monsanto.

Bayer had said Thursday that its executives met recently with their Monsanto counterparts “to privately discuss a negotiated acquisition” of the specialist in genetically modified crop seeds, which is headquartered in St. Louis. Monsanto said then that it was reviewing Bayer’s proposal.

Bayer said it plans to finance the acquisition with a combination of debt and equity, the latter to be raised largely by issuing new shares. Bayer’s shares, which tumbled after the initial announcement last week, dropped 3.1% in early Frankfurt trading Monday, to 86.78 euros ($97.37). Monsanto shares jumped 11.3% to $112.98 in pre-market trading.

The German company said that it “is prepared to proceed immediately to due diligence and negotiations and to quickly agree to a transaction.”

“Monsanto is a perfect match to our agricultural business,” Bayer Chief Executive Werner Baumann said in a video message posted on his company’s website. “We would combine complementary skills with minimal geographic overlap.”

“The acquisition of Monsanto checks all the boxes in terms of strategic fit and value creation potential,” he added. “At the same time, ongoing consolidation activities in the industry make this combination by far the most attractive one.”

Baumann said Bayer expects the transaction to “create significant synergies” and bolster earnings in the first full year after it is completed.

Both companies are familiar brands on farms around the globe. Bayer’s farm business produces seeds as well as compounds to kill weeds, bugs and fungus.

Monsanto has about 20,000 employees and produces seeds for fruits, vegetables and other crops including corn, soybeans and cotton, as well as the popular weed-killer Roundup.

Bayer, headquartered in Leverkusen, Germany, employs about 117,000 people worldwide.

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UPDATES:

May 23, 4:35 a.m.: This article has been updated with additional background.

This article was originally published on May 22 at 11:27 p.m.