Bayer to buy Monsanto for $63 bn; 117-year old brand name set to be trashed

A deal which has been hanging for two years now, has seen the light of day today with Bayer AG announcing the company’s intention for closing the deal with Monsanto on June 7. Bayer will acquire Monsanto for $63 billion and will become the sole shareholder of the company. Not only this, Bayer also wrap-up the 117-year old Monsanto brand name and will sell all products under the Bayer portfolio. Bayer announced its intention to acquire Monsanto in May 2016 and signed an agreement with the U.S. company for 128 U.S. dollars per share in September 2016.

Currently that corresponds to a total cost of approximately 63 billion U.S. dollars taking into account Monsanto’s debt outstanding as of February 28, 2018.

Werner Baumann, Chairman of the Board of Management of Bayer AG said, “The acquisition of Monsanto 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.”

In connection with the comprehensive regulatory approval process, Bayer has agreed to the divestiture of businesses which generated 2.2 billion euros in sales in 2017 for an aggregate base purchase price of 7.6 billion euros. 

Including Monsanto and taking the divestitures into account, the health and agriculture businesses would have been roughly equal in size in 2017, with total pro forma sales of around 45 billion euros including combined Crop Science sales of around 20 billion euros. 

In 2017, both companies together employed approximately 115,000 people, accounting for the divestment.

This 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 double-digit percentage. 

Moreover, adjusted for divestment, Bayer expects synergies to deliver annual contributions of 1.2 billion U.S. dollars to EBITDA before special items as of 2022.

According to the conditional approval from the United States 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 be in approximately two months. 

Baumann added, “We have diligently prepared for the upcoming integration over the past two years. Our extensive experience in integrating other large companies has proven that we can and will be successful.”

In a notification, Bayer added, “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.”