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Published: Sun, September 18, 2016
Economy | By Melissa Porter

Bayer signs deal to acquire Monsanto for $66 billion

Bayer signs deal to acquire Monsanto for $66 billion

The China National Chemical Corporation announced in February that it would buy Switzerland-based Syngenta for $43 billion, six months after rejecting a buyout overture from Monsanto. The $128 per share deal is the largest cash bid on record and will create a company that commands more than a quarter of the world's market for seeds and pesticides.

It's the third time Bayer has cranked up its offer, and this time it was enough to win the backing of Monsanto's board. Monsanto Chief Executive Officer Hugh Grant said Wednesday on a conference call to discuss the deal with analysts that there's "very little overlap" between with Bayer.

Bayer has been courting the United States crops and seeds specialist for months. This means that growers can easily tap into both areas of expertise for help in digital agriculture and crop protection.

The companies expect the world population to grow by 3 billion people by 2050, creating an increased need for improved crop yields and sustainability. Bayer makes a wide range of crop protection chemicals, while Monsanto is known for its seeds business. Pro forma sales of the combined agricultural business amounted to Euro 23 billion in calendar year 2015. But regulators might still be wary of the purchase, based on the combined control the company would have over agricultural products.

German chemical powerhouse Bayer has finally made an offer sweet enough to sway seed seller Monsanto to sell today. Bayer is planning to fund the transaction with a combination of debt and equity.

Bridge financing for $57 billion is committed by BofA Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan, it added. The companies will work diligently with regulators to ensure a successful closing.

Signaling its confidence that it would be able to push the deal through, Bayer, as part of negotiations, told Monsanto that it would pay a $2 billion break-up fee if it falls apart. "This combination is a great opportunity for employees, who will be at the forefront of innovation in our sector". It made a failed bid previous year to buy Swiss company Syngenta.

One impetus for Monsanto is the company's ambition to become a one-stop shop for farmers, and to sell a comprehensive array of fertilizers and seeds to be used in conjunction with big data applications. Or will Bayer and Monsanto remain separate entities?

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