Birdseed

23 May 2016 By Olaf Storbeck

A $62 bln all-cash offer from the German titan exploits a cyclical downturn in global agrochemicals. Even if Monsanto’s profit picks up again as expected, however, investors would have to value it considerably higher to match the takeover price. The bird in hand will be tempting.

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Bayer, the German conglomerate, on May 23 offered $122 a share in cash to buy Monsanto in a deal that values the U.S. seed maker at $62 billion, including net debt.

The price tag represents a 37 percent premium to where Monsanto shares were trading on May 9, the day before Bayer privately made the offer. Bayer shares were trading down 3.6 percent to about 86 euros each in afternoon trading in Germany. Monsanto shares gained 6.6 percent to $108.25 apiece in morning trading in New York.

According to Bayer, its offer values Monsanto at 15.8 times EBITDA over the last 12 months. It expects to find $1.5 billion of total synergies three years after completing the deal.

Bayer said funding for the transaction would come from both debt and equity. It said it has the support of Bank of America Merrill Lynchand Credit Suisse, and also would undertake a rights issue to cover the roughly 25 percent of the consideration funded by equity.

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