German giant Bayer buys Monsanto for $66 billion

German drugs and crop chemicals company Bayer on Wednesday announced that it was acquiring U.S. seeds firm Monsanto for $66 billion in the largest ever all-cash deal on record.

The $128 a share deal was an improvement over Bayer's previous offer of $127.50 a share. The offer is 44 per cent higher than the closing price of Monsanto's share on May 9, the day before Bayer's first written proposal to Monsanto.

The deal will create a company commanding more than a quarter of the combined world market for seeds and pesticides in the fast-consolidating farm supplies industry. The transaction includes a break-fee of $2 billion that Bayer will pay to Monsanto should it fail to get regulatory clearance. Bayer expects the deal to close by the end of 2017. However, competition authorities are likely to scrutinize the tie-up closely, and some of Bayer's own shareholders have been highly critical of a takeover plan which they say risks overpaying and neglecting the company's pharmaceutical business.

Both Bayer and Monsanto have presence in India with the US firm selling genetically modified (GM) cotton seeds in the country for more than a decade.

Bayer plans to raise $19 billion to help fund the deal by issuing convertible bonds and new shares to its existing shareholders, and said banks had also committed to providing $57 billion of bridge financing.

Bayer's move to combine its crop chemicals business, the world's second largest after Syn-German giant pays 44% premium for US firm in largest ever all-cash deal genta AG, with Monsanto's industry leading seeds business, is the latest in a series of major tie-ups in the agrochemicals sector. The German company is aiming to create a one-stop shop for seeds, crop chemicals and computer-aided services to farmers.

That was also the idea behind Monsanto's swoop on Syngenta last year, which the Swiss company fended off, only to agree later to a takeover by China's state-owned Chem-China.

Elsewhere in the industry, U.S. chemicals giants Dow Chemical and DuPont plan to merge and later spin off their respective seeds and crop chemicals operations into a major agribusiness. The Bayer-Monsanto deal will be the largest ever involving a German buyer, beating Daimler's tie-up with Chrysler in 1998, which valued the U.S. carmaker at more than $40 billion. It will also be the largest all-cash transaction on record, ahead of brewer InBev's $60.4 billion offer for Anheuser-Busch in 2008. Bayer said it expected the deal to boost its core earnings per share in the first full year.

In association with Mail Today Bureau