German pharmaceutical giant Bayer has announced its intention to offer $62 billion (€55 billion) in cash to takeover agrochemical company Monsanto, as the debate over the use of the pesticide glyphosate continues. EURACTIV’s partner Milano Finanza reports.
Bayer AG, whose offer constitutes $122 a share, said that their proposal represented a substantial premium for Monsanto’s shareholders, as it is 37% higher than the American company’s closing share price on 9 May.
The German pharmaceutical and chemical group said that it intends to finance the deal with a mix of debt and equity, mostly through a rights offering. Bayer added that it predicts annual earnings from synergies totalling $1.5 billion within three years if its proposal were to be accepted.
The sector is already having to adjust to state-owned ChemChina’s acquisition of Swiss agribusiness Syngenta back in February, in a deal worth about $43 billion. Its CEO, John Ramsay, recently told The Wall Street Journal that the purchase is on track to be granted regulatory approval by the end of the year. It is almost certain that a Bayer-Monsanto team-up would have to go through the same process.
Monsanto had not commented on the matter at time of publishing.
If the Monsanto deal goes through, then Bayer’s acquisition will create the world’s largest producer of seeds and chemical products for the agricultural sector, with combined annual sales totalling around $67 billion. Monsanto currently leads the field in seed sales, including genetically modified varieties that are intended to be resistant to pesticides.
However, Bayer’s move may not be to its investors’ liking, given that the company is more focused on healthcare and pharmaceutical products, rather than farming and genetically modified crops. The German group’s shares fell by 1.7% in pre-market trade after slipping by 7% last week.
The EU is currently mired in an emotional debate about whether to reapprove the use of glyphosate for use in agricultural herbicides, such as Monsanto’s Roundup product. Expert opinion is divided on the issue of whether the ingredient is carcinogenic or not, and other groups have voiced fears that the chemical is also a hormone disruptor.
The European Commission made it clear that reapproval would not be granted without a qualified majority among member states.