Bayer AG (ETR:BAYN), the German chemical and pharmaceuticals company, offered to acquire Monsanto Company (NYSE:MON) for $122 per share or $62 billion in cash, which represents a significant premium to the value of the U.S. company.
Currently, Monsanto has a market cap of around $47 billion based on data from Google Finance. The company’s shares are trading $107.00 each, up by more than 5% at the time of this writing, around 12:40 in the afternoon.
Bayer aims to create a global leader in agriculture
Bayer’s $122 per share proposal for Monsanto represents a 37% premium to its $89.03 closing price on May 9, the day before sending its written offer.
The German company believes that acquiring Monsanto is a compelling opportunity to create a global agriculture leader while reinforcing itself as a Life Science company.
In a statement, Bayer CEO Werner Bauman said, “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.”
He added, “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 expected the merger to provide its shareholders with accretion to core Eps by a mid-single-digit percentage in the first full year after the completing the deal, and a double-digit percentage thereafter.
The German company estimated its initial annual earnings contributions from total synergies to be around $1.5 billion after the third year plus additional integrated offers benefits in the following years.
Bayer would finance the deal with a combination of debt and equity including a stock sale worth approximately 25% of the total transaction value.
Bayer is expecting a positive answer from Monsanto
Monsanto confirmed its receipt of Bayer’s unsolicited offer today. The company said its Board of Directors is “reviewing the proposal, in consultation with its financial legal advisors.”
The company added that it “will have no further comment until its Board of Directors has completed its review. There is no assurance that any transaction will be entered into or consummated, or on what terms.”
During a conference call with reporters, Bauman said they “fully expect a positive answer” from Monsanto’s Board. He also said described the criticisms of some investors as “an uneducated reaction in the media” when the terms of its proposal was not yet disclosed.