|
 The unsolicited proposal, which includes debt, would be the largest
foreign takeover by a German company if accepted.
The move, which would eclipse a planned combination of Dow Chemical
and DuPont's agriculture units, comes just three weeks after Werner
Baumann took over as Bayer CEO, and was condemned by a major
shareholder as "arrogant empire-building" when news of the proposal
emerged last week.
Giving details for the first time, Bayer said on Monday it would
offer $122 per share, a 37 percent premium to Monsanto's stock price
before rumors of a bid surfaced.
"We fully expect a positive answer of the Monsanto board of
directors," Baumann told reporters on a conference call, describing
criticism from some investors as "an uneducated reaction in the
media" when deal terms were not yet known, and driven by an element
of surprise.
Monsanto, which said last week it had a received an approach from
Bayer but gave no details, has yet to comment on the offer. The U.S.
company's shares jumped 9.5 percent to $111.17 in pre-market
trading.
"UPPER LIMIT"
Global agrochemicals companies are racing to consolidate, partly in
response to a drop in commodity prices that has hit farm incomes and
also due to the growing convergence between seeds and pesticides
markets.
ChemChina is buying Switzerland's Syngenta for $43 billion after
Syngenta rejected a bid from Monsanto, while Dow and DuPont are
forging a $130 billion business.
With German rival BASF also looking into a possible tie-up with
Monsanto, Bayer has moved to avoid being left behind.
Baumann rejected suggestions from some investors that Bayer should
instead try to forge a joint venture with Monsanto, saying this
would have tax disadvantages.
Sources close to the matter have said BASF is unlikely to start a
bidding war with Bayer. BASF declined to comment on Monday. But
analysts say Bayer might still have to pay more to persuade Monsanto
and its shareholders to sell up.
That could be a problem, with some saying Bayer's proposal, at 15.8
times its earnings before interest, tax, depreciation and
amortization for the year ended Feb. 29, is already a stretch for
the German company.
"The price that has now been disclosed is at the upper limit and it
is just about economical. Should it rise further, which is to be
assumed, the takeover will become increasingly unattractive," said
Markus Manns, a fund manager at Union Investment, Bayer's 14th
biggest investor.
[to top of second column] |
Shares in Bayer, which had already fallen 14 percent since rumors of a bid
emerged last week, dropped as much as 3.6 percent on Monday to a new 2-1/2 year
low of 86.3 euros.
"VERY AMBITIOUS"
Bayer said it would finance the bid with a combination of debt and equity,
primarily a share sale to existing investors. Equity would account for about a
quarter of the deal value.
Equinet analyst Marietta Miemietz, who has a 'buy' rating on Bayer stock, said
the extra debt appeared manageable but could limit Bayer's ability to invest in
its healthcare business, which some analysts think needs a boost to its drugs
pipeline.
Baumann said Bayer would continue to develop its healthcare arm, which includes
stroke prevention pill Xarelto and aspirin, the painkiller it invented more than
a century ago.
"We are not feeding Peter by starving Paul here," he said, adding no asset sales
were planned to help pay for the deal.
Bayer also forecast synergies from a deal with Monsanto would boost annual
earnings by around $1.5 billion after three years, plus additional future
benefits from integrated product offerings - a reference to its push to combine
the development and sale of seeds and crop protection chemicals.
Berenberg analysts, who have a 'buy' rating on Bayer shares, described the
synergies estimate as "very ambitious".
(Reporting by Maria Sheahan, Ludwig Burger and Patricia Weiss; Writing by Ludwig
Burger and Georgina Prodhan; Editing by Edwina Gibbs and Mark Potter)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
