* Bayer agrees $128 per share cash deal to buy Monsanto
* Deal includes a $2 billion break fee
* Bayer says expects deal to close by end-2017
(Adds company, investor, analyst comments, detail, shares)
By Greg Roumeliotis and Ludwig Burger
NEW YORK/FRANKFURT, Sept 14 German drugs and
crop chemicals company Bayer has won over U.S. seeds
firm Monsanto with an improved takeover offer of $66
billion including debt, ending months of wrangling after
increasing its bid for a third time.
The $128 a share deal announced on Wednesday, up from
Bayer's previous offer of $127.50 a share, is the biggest of the
year so far and the largest cash bid on record.
The transaction will create a company commanding more than a
quarter of the combined world market for seeds and pesticides in
a fast-consolidating farm supplies industry.
However, competition authorities are likely to scrutinise
the tie-up closely, and some of Bayer's own shareholders have
been critical of a takeover plan which they say is too expensive
and risks neglecting the company's pharmaceutical business.
"Bayer's competitors are merging, so not doing this deal
would mean having a competitive disadvantage," said Markus
Manns, a fund manager at Union Investment, one of Bayer's top 12
investors, according to ThomsonReuters data.
He said few people had expected a deal to be agreed at less
than $130 a share, but that there were regulatory risks and the
acquisition would also leave Bayer with less scope to invest in
healthcare, where rivals are consolidating too.
The transaction includes a break-fee of $2 billion that
Bayer will pay to Monsanto should it fail to get regulatory
clearance. Bayer expects the deal to close by the end of 2017.
The details confirm what a source close to the matter told
At 1430 GMT, Bayer shares were up 2.4 percent at 95.52
euros. Monsanto's were up 0.7 percent at $106.80.
Baader Helevea Equity Research analyst Jacob Thrane, who has
a "sell" rating on Bayer shares, said the German company was
paying 16.1 times Monsanto's forecast core earnings for 2017,
more than the 15.5 times ChemChina agreed to pay for Swiss crop
chemicals firm Syngenta last year.
He also said there was uncertainty over what the combined
company would look like as regulators might demand asset sales.
Some analysts said the deal could face a rough ride from
U.S. politicians opposed to a key supplier of U.S. agriculture
falling into foreign hands and from farmers concerned a
reduction in competition could lead to higher prices.
Bayer said it needed approval from antitrust authorities in
30 jurisdictions, but its initial feedback from both regulators
and politicians was encouraging.
The German firm said it expected the deal to boost core
earnings per share in the first full year following completion,
and by a double-digit percentage in the third year. It is
targeting $1.2 billion in annual cost synergies and $300 million
in sales synergies after three years.
Bayer's move to combine its crop chemicals business, the
world's second largest after Syngenta, with Monsanto's industry
leading seeds business, is the latest in a series of major
tie-ups in the agrochemicals sector.
The German company is aiming to create a one-stop shop for
seeds, crop chemicals and computer-aided services to farmers.
That was also the idea behind Monsanto's swoop on Syngenta
last year, which the Swiss company fended off, only to agree
later to a takeover by China's state-owned ChemChina.
Elsewhere, U.S. chemicals giants Dow Chemical and
DuPont plan to merge and later spin off their respective
seeds and crop chemicals operations into a major agribusiness.
"The combined business will be ideally suited to cater to
the requirements of farmers ... because we have equal and
meaningful strength in both crop protection, seeds and traits,
and digital and analytical tools," Bayer Chief Executive Werner
Baumann said on a call with analysts.
The deal will be the largest ever involving a German buyer,
beating Daimler's tie-up with Chrysler in 1998, which valued the
U.S. carmaker at more than $40 billion. It will also be the
largest all-cash transaction on record, ahead of brewer InBev's
$60.4 billion offer for Anheuser-Busch in 2008.
Bayer said it was offering a 44 percent premium to
Monsanto's share price on May 9, the day before it made its
first written proposal.
It plans to raise $19 billion to help fund the deal by
issuing convertible bonds and new shares to its existing
It also said BofA Merrill Lynch, Credit Suisse
, Goldman Sachs, HSBC and JP Morgan
had committed to providing $57 billion of bridge
financing and that it was targeting an investment grade credit
rating after completion of the deal.
Bayer and Monsanto were in talks about a possible tie-up as
early as March, which culminated in Bayer's initial $122
per-share proposal in May.
Antitrust experts have said regulators will likely demand
the sale of some soybeans, cotton and canola seed assets as a
condition for approving the deal.
BofA Merrill Lynch and Credit Suisse are acting as lead
financial advisers to Bayer, with Rothschild as an additional
adviser. Bayer's legal advisers are Sullivan & Cromwell LLP and
Allen & Overy LLP.
Morgan Stanley and Ducera Partners are financial advisers to
Monsanto, with Wachtell, Lipton, Rosen & Katz its legal adviser.
(Additional reporting by Arno Schuetze and Christoph Steitz;
Editing by Maria Sheahan and Mark Potter)