German drugs and crop chemicals company Bayer has won over US seeds firm Monsanto with an improved takeover offer of around $66bn (€59bn), ending months of wrangling after increasing its bid for a third time.
The $128 a share deal, 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 deal will create a company commanding more than a quarter of the combined world market for seeds and pesticides in the fast-consolidating farm supplies industry.
However, competition authorities are likely to scrutinize the tie-up closely, and some of Bayer’s own shareholders have been highly critical of a takeover plan which they say risks overpaying and neglecting the company’s pharmaceutical business.
The transaction includes a break fee of $2bn that Bayer will pay to Monsanto should it fail to get regulatory clearance. Bayer expects the deal to close by the end of 2017.
Bernstein Research analysts said on Tuesday it saw only a 50% chance of the deal winning regulatory clearance, although it cited a survey among investors that put the likelihood at 70% on average.
“We believe political pushback to this deal, ranging from farmer dissatisfaction with all their suppliers consolidating in the face of low farm net incomes to dissatisfaction with Monsanto leaving the US, could provide significant delays and complications,” they wrote in a research note.
Bayer said it was offering a 44% premium to Monsanto’s share price on May 9, the day before it made its first written proposal. It plans to raise $19bn to help fund the deal by issuing convertible bonds and new shares to its existing shareholders, and said banks had also committed to providing $57bn of bridge financing.
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.
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