Monsanto (MON) to Be Acquired by Bayer AG in $62B Deal

Shares of the Monsanto Company Inc. (MON) were up +8.25 or +8.13 percent to $109.76 in Monday’s premarket after German company and competitor Bayer AG made a formal bid for the company early this morning. Monsanto shares closed at $101.52, up +0.97 or +0.96 percent in Friday’s regular trading session.


Stock Analysis

Creve Coeur, Missouri based Monsanto Company Inc. was founded by John Francis Queeny in 1901 and was originally a producer of food additives such as vanillin and saccharine.
The company began producing industrial chemicals in the 1920s becoming a major plastics and synthetic fiber producer in the 1940s. Monsanto has since become a multinational agro biotechnology and agrochemical company which has had a long history of controversy due to its biotechnology and chemical products. Monsanto was the first company to genetically modify a plant cell in 1983, and in 1987 began conducting field trials of genetically modified agricultural crops. The company divested a large part of its chemical business between 1997 and 2002 and has since focused on biotechnology.

Monsanto’s principal products are glyphosate herbicides which were developed in 1970 and are currently marketed under the Roundup brand. Monsanto’s other main products are genetically modified crop seeds. The company is also the world’s largest supplier of non-GMO vegetable seed with over 4,000 seed varieties from more than 20 species.

Leverkusen, Germany based Bayer AG was founded in 1863 and originally produced acetylsalicylic acid, which it trademarked as Aspirin. Nevertheless, the trademark was lost in the United States, UK and France as a result of the company’s U.S. assets being forfeit during World War I. The company also trademarked Heroin and marketed the drug as a cough suppressant. The company has since become a major multinational pharmaceutical and chemical company. Bayer is also a major producer of pesticides through its CropScience segment.

This morning, Bayer AG confirmed it had made an unsolicited all cash offer to acquire all of Monsanto’s outstanding common stock for $122 per share, which would value Monsanto at $62 billion. The amount represents a +37 percent premium over Monsanto stock’s closing price on May 9th, the last trading day before the beginning of market speculation of the acquisition; +36 percent over the stock’s three month volume weighted average price and +33 percent over its six month volume weighted average price.

The acquisition, which includes Monsanto’s debt, would be the largest ever for a German company and create a giant in the farming supplies and seed industry. The takeover — which has yet to be accepted by Monsanto’s board of directors — was criticized by a major shareholder who said it was “arrogant empire building” by Bayer AG’s Chief Executive Officer Werner Baumann, who became Chief Executive three weeks ago.

Baumann said in the company’s press release that, “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. 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.”

Bayer said it would finance the deal through a combination of equity and debt and expects annual earnings contributions from synergies of approximately $1.5 billion after three years. Bayer is also expecting to provide shareholders with accretion to core earnings per share by a mid single digit percentage in the first full year after the close of the transaction followed by double digit percentage thereafter. Monsanto has not yet responded while the market is reacting cautiously to the proposed deal, with Monsanto’s share price trading significantly below the offer price.

Other News About MON

Bayer CEO Baumann on Monsanto $62 Billion Takeover Bid

A video interview with Bayer’s Baumann this morning about the bid for Monsanto.

Monsanto Deal Would Put Bayer Deep Into GMO

If successful, deal would make agricultural and GMO products half of Bayer’s business.

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Published on May 23, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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