Bayer offers tens of billions for Monsanto

German drugs and chemicals group Bayer said Monday it had offered $62 billion (55 billion euros) for US agrochemicals giant Monsanto. Should the transaction be finalized, the merger would create the world's biggest producer of pesticides, seeds and fertilizers.

Bayer said in a statement it had made a cash offer of $122 per share, following weeks of speculation about a possible tie-up.

Monsanto had first disclosed Bayer's approach last Wednesday, but neither side had provided details on any proposed terms of the deal.

Bayer said it was in advanced discussions with banks about financing the deal, and said any money it would have to borrow to finalize the deal could be quickly repaid due to "the strong cash-flow generation of the combined business, as well as Bayer's track record of disciplined deleveraging after large acquisitions."

Bayer also plans to raise a round of fresh equity capital from investors to help finance the deal. Company CEO Werner Baumann said he did not foresee having to sell off any of Bayer's portfolio of businesses to finance the Monsanto deal.

Investor concerns

Monsanto's huge market capitalization means that the transaction would most likely eclipse ChemChina's planned acquisition of Swiss agrichemicals company Syngenta. But Bayer's move was expected to face US antitrust hurdles, analysts said.

Deutsche Bank said the proposed deal could shift Bayer's center of gravity to agriculture, which henceforward would account for about 55 percent of core earnings. The German firm's healthcare-focused investor base would be unhappy about such a shift, the lender argued.

Most major agrichemical companies have been aiming to genetically engineer crop plants resistant to custom-formulated herbicides and pesticides, which allows farmers to use those chemicals to kill all plants in an area except the crop plant, as well as any insects. The result: Monocultures free of biodiversity.

Agrochemical companies sell package deals composed of both genetically modified seeds and the corresponding herbicides and pesticides to farmers, generating enormous cash-flow world-wide.

Reputational risk

Environmental activists have questioned the wisdom of Bayer's takeover offer, noting that Monsanto has a very negative image amongst people whose opinions align with "green" discourse. Most "greens" oppose genetically modified organisms and favor organic farming, free of synthetic herbicides or pesticides, over industrial agrochemical farming.

Monsanto's reputation is closely linked to genetically modified seeds and to pesticides and herbicides - including glyphosate, around which a controversy is currently raging in Europe over ambiguous evidence suggesting it could be considered cancer-causing or endocrine-disrupting. Glyphosate is one of Monsanto's major sources of revenue, and there is a risk it might eventually be banned.

"Gene technology and pesticides are not technologies of the future, but ones of risk," said Anton Hofreiter, head of the Green Party in the German parliament. "Doing this [merger with Monsanto] will put the lie to Bayer's talk of a sustainable corporate culture."

hg/jd (Reuters, AFP)