3 Highlights of Bayer’s $62 Billion Offer to Monsanto

| January 4, 2018
Event: Bayer’s Offer to Monsanto Mammoth

Bayer, the German pharmaceutical and agrochemicals giant, has made an offer of $62 billion to acquire the US-based seed giant Monsanto. This news is trending everywhere in business magazines. Below are three key highlights you should know regarding this deal.

  1. If the deal goes through, it will give rise to the biggest company in agricultural and farming products. Do you wonder what will be the combined market cap? The current numbers indicate that the cap could be well over $120 billion.
  2. The deal is an all-cash offer. According to Bayer, this will help the investors of Monsanto to benefit promptly. (The $62 billion dollar translates to $122 per share.)
  3. This merger will be the biggest by any company in Germany and will be among top 15 all global acquisitions of all time.


Impact on Financial Performance:

How will the two companies complement each other if merged?

You should know few obvious benefits that Bayer is expecting from the acquisition are as follows.

You already know that Monsanto is a global leader in seeds. (The company is notable for its genetically modified seed production.) Bayer, on the other hand, is a leader in agrochemicals. The potential customer profile (for farming related products) is more or less identical. Hence, when these two companies combine, they would complement each other. On financial terms, this may help in reducing overhead costs.

Moreover, since the products do not compete directly, the combination is a natural fit. The company will be able to provide a broad range of products for farmers. The merger will increase the range of products and hence financial performance. The positives will directly impact the shareholder prospects as well.

How investors of both the companies perceive the offer?

The shares of Monsanto reacted positively while that of Bayer AG fell by about 5% (on Monday close).

On Thursday (May 19), Bayer had confirmed that the discussions of the acquisition were going on.

On Friday, the shares of Monsanto appreciated by 0.96% and closed at $101.52.
On the same day, the Bayer stock increased moderately by over 1% and closed at €89.54.

The offer of $62 billion was made public by Bayer on May 23 (Monday).

Compared to Friday, On Monday, the share price of Bayer closed 5.72% lower at €84.42. This drop may be due to the concerns on financial and operational strain that the company could face due to such a massive acquisition.

However, the perception seems to be positive among Monsanto investors. The price appreciated by 4.41% and closed at $106.

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