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Bayer makes £50bn deal for Monsanto to create biggest seeds and pesticides firm

Published 14/09/2016

Bayer is to acquire Monsanto in a deal creating the world's largest seeds and pesticides firm
Bayer is to acquire Monsanto in a deal creating the world's largest seeds and pesticides firm

German pharmaceuticals and chemicals giant Bayer is to acquire Monsanto in a 66 billion US dollars (£50 billion) deal that will create the world's largest seeds and pesticides company.

The all-cash deal will see Bayer acquire Monsanto at 128 US dollars per share (97p)

Bayer has been courting the US crops and seeds specialist for months.

The German company previously offered Monsanto 125 US dollars per share. That bid was turned down by Monsanto which deemed the price inadequate.

Bayer later sweetened its bid, raising its offer incrementally until agreeing to the deal at 128 US dollar per share.

Werner Baumann, chief executive of Bayer, said: "We are pleased to announce the combination of our two great organisations.

"This represents a major step forward for our Crop Science business and reinforces Bayer's leadership position as a global innovation driven Life Science company with leadership positions in its core segments, delivering substantial value to shareholders, our customers, employees and society at large," he added.

Bayer said sales in the combined agriculture business would be worth as much as 23 billion euro, based on 2015 figures, adding that its annual research and development budget could total 2.5 billion euro.

John Colley, a professor at Warwick Business School, warned it may be too soon to celebrate the deal, which is expected to come up against significant antitrust hurdles.

"Apart from Monsanto's shareholders, who have hit the jackpot, this looks like a lose-lose bid.

"Bayer have been forced into paying too much and face major integration and competition authority risks."

Mr Colley said Bayer may have felt pressure to seal the deal with Monsanto amid a wave of sector consolidation.

It is the latest in a series of global agribusiness deals, including ChemChina's 44 billion dollar (£33 billion) takeover of Syngenta and the 130 billion dollar (£98.6 billion) merger of Dow Chemicals and Du Pont.

"Bayer was clearly concerned at being left behind and was running out of options for merger targets, precipitating the move for Monsanto," Mr Colley claimed.

Bayer may also have to contend with reputation concerns, given that Monsanto has been the target of the controversial campaign against genetically modified food.

The German firm currently has its UK operations headquarters in Newbury, focusing on pharmaceuticals, consumer and animal health. Bayer's UK crop science unit is currently based in Cambridge.

Monsanto's UK operations, which include a vegetable seeds division, is also based in Cambridge.

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