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article imageBayer AG clinches deal to buyout Monsanto for $66 billion

By Karen Graham     Sep 14, 2016 in Business
German drug and farm chemical maker Bayer AG has finally reached a deal with U.S. seed and weed killer company Monsanto that could create a company that will control over a quarter of the world's market for seeds and pesticides.
The third time's the charm. Negotiations on the buyout have taken several months, according to the Associated Press, but after a third offer of $128 a share, up from $127.50, Monsanto agreed to the deal worth $66 billion.
In a joint announcement on Wednesday, the two companies said the $128 a share deal represents a 44 percent premium over Monsanto's closing stock price on May 9, 2016 (one day before the proposed deal was announced). Reuters is saying the takeover deal also includes net debt and equity valued at $57 billion.
Monsanto's shareholders must approve the deal and that is not expected to happen until next year. In the meantime, anti-trust regulators will be scrutinizing the takeover very closely. There is concern that the tie-up would create a mega-company that could end up controlling a quarter of the world's seed and pesticide market.
Many of Bayer's shareholders are not pleased with the deal, saying the merger is too expensive and could end up neglecting the pharmaceutical end of the company.
The Bangkok Post reported that analyst Peter Spengler with DZ bank was skeptical of the deal even before it was announced on Wednesday, writing, "We do not like this transaction because we think that Bayer is overpaying significantly."
The buyout would have to have the approval of anti-trust regulators in 30 jurisdictions, but Bayer doesn't seem too worried, saying feedback from politicians and regulators has been encouraging. But they haven't come up against U.S. politicians who are fearful of Monsanto, based in the U.S., falling into foreign hands.
"The combination with Monsanto represents the kind of revolutionary approach to agriculture that will be needed to sustainably feed the world," Bayer chief executive Werner Baumann told investors in a conference call.
The bottom line in this takeover is that we are seeing a new phase in agriculture on a worldwide level. Remember that Syngenta fended off a buyout from Monsanto earlier this year, only to succumb to a takeover by China's state-owned ChemChina.
And chemical giants Dow Chemical and DuPont are also planning to merge with the goal of spinning off their seed and crop chemicals operations into a major agribusiness entity.
More about Monsanto, Bayer, Buyout, antitrust regulators, $66 billion
 
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