Bayer offers US$62bn for Monsanto

BAYER has made a US$62bn bid for Monsanto in an effort to create a global leader in agricultural seeds and chemicals.

News of the deal broke last week but neither company disclosed the value of the bid. Bayer has now disclosed the terms of the deal including the text of a letter from Bayer’s CEO thanking his counterpart for arranging the meeting to discuss the merger.

“I appreciated the opportunity to hear your views on the value of a globally integrated agriculture platform and your vision that a combination […] would be a winning formula,” Bayer CEO Werner Baumann wrote to Monsanto CEO Hugh Grant. “As you mentioned, a Monsanto and Bayer combination offers the best strategic fit in the industry.”

Bayer says the combined business would benefit from Monsanto’s strengths in seeds and its own in crop protection chemicals. If the deal goes through, and following on from last year’s spin-out of its materials science business, Bayer will have shifted from predominantly a pharmaceutical company – worth two thirds of sales in 2015 – to an even split with crop science.

“The combination would create a truly global agriculture leader with a comprehensive and balanced product line across business segments and geographies,” Baumann said.

Monsanto has added nothing in response beyond its initial reaction from last week that its board is reviewing the process.

Whether the bid will be large enough to tempt Monsanto into a partnership could be in doubt given that Deutsche Bank analysts believe Monsanto want US$150/share compared to the US$122 offered by Bayer.

In May 2015, Monsanto attempted to buy its rival Syngenta for US$45bn. Syngenta’s board repeatedly rebuffed the offers, despite revisions, and Monsanto dropped its takeover bid in August. Monsanto CEO Hugh Grant told investors in October last year that he would continue to seek partnerships and opportunistic deals. He said to the Wall Street Journal that he believed consolidation was “inevitable”. In February, ChemChina agreed to buy Syngenta for US$43bn.