A Merger of Two Evils: Bayer to Acquire Monsanto for $66 Billion

Bayer is paying $26b more than the original price, wholly and fully negotiating against themselves.

There are very few, if not any, corporations as bad as Bayer, from introducing heroin and cocaine into the household to heart medicine that was killing 1,000 patients per month to collaborating with the Nazis to produce poisonous gas to exterminate Jews to spreading HIV, amongst many other hideous offences. Now that Bayer and the good GMO folks at Monsanto have merged, I am almost certain the combined companies can figure out a way to eradicate life on the planet.

Bayer (BAYRY) and Monsanto announced that they signed a definitive merger agreement under which Bayer will acquire Monsanto for $128 per share in an all-cash transaction. Monsanto’s Board of Directors, Bayer’s Board of Management and Bayer’s Supervisory Board have unanimously approved the agreement.

Pro forma sales of the combined agricultural business amounted to EUR 23 bln in calendar year 2015. The combined company is expected to be well positioned to participate in the agricultural industry with significant long-term growth potential. Beyond the attractive long term value creation potential of the combination, Bayer expects the transaction to provide its shareholders with accretion to core EPS (earnings per share) in the first full year after closing and a double-digit percentage accretion in the third full year. Bayer has confirmed sales and cost synergies assumptions in due diligence and expects annual EBITDA contributions from total synergies of ~$1.5 billion after year three, plus additional synergies from integrated solutions in future years.

Bayer intends to finance the transaction with a combination of debt and equity. The equity component of ~$19 bln is expected to be raised through an issuance of mandatory convertible bonds and through a rights issue with subscription rights. Bridge financing for $57 bln is committed by BofA Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan.

Bayer targets an investment grade credit rating post-closing and is committed to the single “A” credit rating category over the long-term.

The acquisition is subject to customary closing conditions, including Monsanto shareholder approval of the merger agreement and receipt of required regulatory approvals. Closing is expected by the end of 2017. The companies will work diligently with regulators to ensure a successful closing. In addition, Bayer has committed to a $2 bln reverse antitrust break fee, reaffirming its confidence that it will obtain the necessary regulatory approvals.