Big deal: German company buys Monsanto for $66 billion

If the deal closes, it will create an entity that commands more than a quarter of the combined world market for seeds and pesticides in the farm supplies industry. Bayer initially offered $122 months ago when negotiations began. Yet the value created by the deal, after taxing and capitalising the annual savings of $1.5 billion, is just $12 billion. The transaction price represents a 44% premium to Monsanto’s share price on May 9, the day before Bayer submitted its first written proposal to acquire Monsanto.

If the deal does fail to receive regulatory clearance Bayer, will have to pay Monsanto a $2 billion breakup fee.

In the combined agriculture business, Bayer plans to house its global seeds and North American commercial headquarters in St. Louis and base its global crop protection and overall crop science headquarters in Monheim, Germany.

The all-cash offer values Monsanto at US$128 per share and is equivalent to US$66 billion.

Hugh Grant, chairman and CEO of Monsanto stated, “we are entering a new era in Agriculture – one in which growers are demanding new solutions and technologies to be more profitable and to be even more sustainable”. Including debt, the deal is valued at around $66 billion.

Bayer shares rose 3 percent to 96.11 euros.

But those involved with the deal say it shows a commitment by both companies to help feed a growing population that’s estimated to grow by three billion people by 2050.

To get their approval, antitrust experts think the companies may have to sell some assets like soybeans, cotton and canola seeds.

Monsanto’s genetic materials are used in 90 percent of the USA soybean crop, according to multiple reports.

St. Louis-based Monsanto is infamous both for its genetically modified crops and for being the world’s largest seller of seeds. It also agreed to divest its smaller NexGen cottonseed brand.

Farming groups have raised concerns that such mergers could lead to fewer choices and higher prices.

Antitrust officials will have to consider not just each deal individually, but how all the deals combined would affect markets, said Elai Katz, an antitrust attorney at Cahill Gordon & Reindel LLP in NY.

Alanna Petroff contributed to this article.