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Bayer Plans to Close on Monsanto June 7

The Monsanto name will be no more, as Bayer will be the company name.

Bayer plans to complete its acquisition of Monsanto this Thursday, June 7. That’s contingent on receiving all approvals from regulatory authorities. 

“The acquisition of Monsanto is a strategic milestone in strengthening our portfolio of leading businesses in health and nutrition,” said Werner Baumann, chairman of the board of management of Bayer AG in a Bayer news release. “We will double the size of our agriculture business and create a leading innovation engine in agriculture, positioning us to better serve our customers and unlock the long-term growth potential in the sector.”

With the conditional approval from the U.S. Department of Justice given last week, the integration of Monsanto into Bayer will occur as soon as divestments to BASF have been completed.

It’s expected this will occur in approximately two months. The Monsanto name will be no more, as the name of the company will remain Bayer. The acquired products will remain their brand names and become part of the Bayer portfolio. 

Long Road

Bayer first announced its intention to buy Monsanto in May 2016. It signed an agreement to buy it for $128 per share in September 2016. Currently, this corresponds to a total cost of approximately $63 billion when taking into account Monsanto’s debt outstanding as of February 28, 2018.

Along the way, Bayer had to divest businesses to satisfy regulators. Last week, the U.S. Department of Justice (DOJ) required Bayer to divest businesses and assets collectively worth approximately $9 billion in order to proceed with the acquisition. Last October, BASF announced its intent to buy the  LibertyLink weed-control system from Bayer for approximately $6.97 billion. 

The deal did allow Bayer to obtain The Climate Corporation, which it wanted to move into the digital agriculture arena.

Not all parties are pleased with the deal. Last week, the National Farmers Union and Organization for The Organization for Competitive Markets, a group that focuses on agricultural antitrust and trade policy, disagreed with the DOJ’s decision to allow the merger to go forward. NFU officials are concerned about the impact the deal will have on the farmer by consolidating more than a quarter of the world’s seed and pesticides market into one company.  

How it’s financed

Bayer expects the purchase to generate a positive contribution to core earnings per share starting in 2019, according to its news release. From 2021 onward, that contribution is expected to be double-digit percentage. 

To buy Monsanto, Bayer secured initial bridge financing of $57 billion. It’s a combination of equity and debt transactions, some of which have already been completed, the company said in a news release. 

Bayer officials say the purchase will allow it to become more innovative in product offerings. Including Monsanto and taking the divestitures into account, the total R&D investment of Bayer in 2017 would have been around 5.7 billion euros ($6.68 billion). Of that, 2.4 billion euros ($2.81 billion) would have been spent in the combined agriculture business on a pro forma basis. 

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