German chemical and pharmaceutical firm Bayer AG publicly disclosed Monday, May 23, details of its proposed acquisition of US seeds maker Monsanto, in response to what it said further market speculation and stakeholder inquiries.

 

Bayer said it has made an all-cash offer to acquire all of the issued and outstanding shares of common stock of Monsanto Company for US$122 per share, or an aggregate value of $62 billion. The offer, contained in a letter to Monsanto dated May 10, 2016, represents a substantial premium of:

• 37% over Monsanto's closing share price of $89.03 on May 9, 2016
• 36% over the three-month volume weighted average share price
• 33% over the six-month volume weighted average share price
• last 12 months EBITDA (earnings before interest, taxes, depreciation and amortization) multiple of 15.8x as of Feb. 29, 2016.

 Bayer expects annual earnings contributions from total synergies of around $1.5 billion after the third year of the acquisition.

 

"We have long respected Monsanto's business and share their vision to create an integrated business that we believe is capable of generating substantial value for both companies' shareholders", said Werner Baumann, CEO of Bayer AG.

 

"Together we would draw on the collective expertise of both companies to build a leading agriculture player with exceptional innovation capabilities to the benefit of farmers, consumers, our employees and the communities in which we operate", he added.

 

Bayer said it was highly confident in its ability to finance the transaction based on the support of its financing banks, BofA Merrill Lynch and Credit Suisse, adding the offer is not subject to a financing condition. The transaction would be financed with a combination of debt and equity. The equity portion would represent around 25% of the transaction's enterprise value and would be raised primarily through a rights offering.

 

Monsanto confirmation

 

Bayer said its board of management and supervisory board unanimously approved the proposal and were fully committed to pursuing the transaction. "Bayer is prepared to proceed immediately to due diligence and negotiations and to quickly agree to a transaction", it said.

 

In fiscal 2015, Bayer AG employed around 117,000 people and had sales of EUR46.3 billion.

 

Monsanto Company, meanwhile, has confirmed that it had received "an unsolicited, non-binding proposal from Bayer AG for a potential acquisition of Monsanto, subject to due diligence, regulatory approvals and other conditions".

 

The US company said in a statement on May 18 that its board of directors was reviewing the proposal, in consultation with its financial and legal advisors.

 

"Monsanto will have no further comment until its board of directors has completed its review. There is no assurance that any transaction will be entered into or consummated, or on what terms", the statement said.

 

Morgan Stanley & Co. and Ducera Partners are acting as financial advisors, and Wachtell, Lipton, Rosen & Katz is acting as legal advisor to Monsanto.  --Rick Alberto