Monsanto name axed after Bayer acquisition finalizes

07 Jun 2018 --- Bayer plans to complete the acquisition of Monsanto today (June 7) after satisfying regulators and clearing all hurdles. The name Monsanto will be no more after the German drug and crops chemicals maker officially acquires the US-based seed and pesticide giant following “the receipt of all required approvals from regulatory authorities.”

Dropping the Monsanto name is part of the deal.

“Bayer will remain the company name. Monsanto will no longer be a company name. The acquired products will retain their brand names and become part of the Bayer portfolio,” says a Bayer statement. 

The deal, often referred to as a mega-merger because of the sheer scale and scope of the two competitors, was set in motion in September 2016, amid a global shakeup fueled by sluggish crop prices.

Bayer signed an agreement with the US company for US$128 per share. Currently, that corresponds to a total cost of approximately US$63 billion taking into account Monsanto’s debt outstanding as of February 28, 2018, says Bayer. 

“The acquisition of Monsanto is a strategic milestone in strengthening our portfolio of leading businesses in health and nutrition,” says Werner Baumann, Chairman of the Board of Management of Bayer AG.

“We will double the size of our agriculture business and create a leading innovation engine in agriculture, positioning us to serve our customers better and unlock the long-term growth potential in the sector.”

Bayer reaching this final stage has not been as straightforward of a process as it has had to go through a comprehensive regulatory approval process, agreeing to the divestiture of businesses which generated €2.2bn (US$2.6bn) in sales in 2017 for an aggregate base purchase price of €7.6bn (US$8.9bn).

In October 2017, German chemical company BASF signed an agreement to acquire significant parts of Bayer’s seed and non-selective herbicide businesses in a US$7 billion deal. In May, the deal won conditional US antitrust approval after the companies agreed to sell off billions in assets to preserve competition.

Before then the mega-merger faced tough scrutiny from the European Commission which launched an in-depth probe into the proposed merger of the two agrichemical giants last year. 

Including Monsanto and taking the divestitures into account, the health and agriculture businesses would have been roughly equal in size in 2017, with total pro forma sales of around €45 billion including combined Crop Science sales of around €20 billion. In 2017, both companies together employed approximately 115,000 people, accounting for the divestments.

What happens next?
According to Bayer, the acquisition is expected to generate “significant value,” and the company anticipates a positive contribution to core earnings per share starting in 2019. It also says that from 2021 onward, that contribution is expected to be a double-digit percentage. 

Moreover, adjusted for divestments, Bayer expects synergies to deliver annual contributions of US$1.2bn to EBITDA before special items as of 2022.

Bayer becomes the sole shareholder of Monsanto today and according to the conditional approval from the US Department of Justice, the integration of Monsanto into Bayer can take place as soon as the divestments to BASF have been completed. This is expected to be in approximately two months.

“We have diligently prepared for the upcoming integration over the past two years. Our extensive experience in integrating other large companies has proven that we can and will be successful,” says Baumann. 

“A holistic approach” 
Bayer has signaled that it will take steps to strengthen sustainability and take a “much more holistic approach to innovation.” 

“Innovation is vital to produce more healthy, safe and affordable food for a growing population in a more sustainable manner. The combination of the two businesses will allow us to deliver more innovation faster and provide solutions tailored to the needs of farmers around the world,” says Liam Condon, Bayer Board Member and President of the Crop Science Division. 

“Going forward, our teams in the labs and in the field will be able to take a much more holistic approach to innovation as we address the enormous challenges we face in agriculture.”

Bayer says that including Monsanto and taking the divestitures into account, the total R&D investment of Bayer in 2017 was around €5.7 billion (US$6.7 billion) and of that, €2.4 billion (US$2.8 billion) was spent in the combined agriculture business on a pro forma basis.

“Bayer is fully aware of the heightened responsibility that a leadership position in agriculture entails. The company will continue to strengthen its commitment in the area of sustainability further,” adds Baumann.

“As a leader, Bayer is fully committed to upholding the highest ethical and responsibility standards, strengthening access to health and nutrition, and further reducing its environmental footprint.”

“We will apply the same rigor to achieving our sustainability targets as we do to our financial targets.” 

He also says that Bayer will “listen to critics” and work together to find common ground. 

“Agriculture is too important to allow ideological differences to bring progress to a standstill. We have to talk to each other. We need to listen to each other. It’s the only way to build bridges,” he adds. 

By Gaynor Selby