Bayer formalizes bid for Monsanto to expand in agrochem, valuing the firm at $62 billion

In response to further market speculation and stakeholder inquiries, Germany’s Bayer (BAYN: DE) is publicly disclosing the contents of its private proposal to acquire Monsanto (NYSE: MON), the US agrichemicals giant which would augment its already successful Crop Sciences business..

Bayer has made an all-cash offer to acquire all of the issued and outstanding shares of common stock of Monsanto for $122 per share or an aggregate value of $62 billion. Last week Bayer confirmed discussions with Monsanto, with media reports suggesting a price tag of around $40 billion for the deal.

This offer, based on Bayer’s written proposal to Monsanto dated May 10, 2016, represents a substantial premium of:
- 37% over Monsanto’s closing share price of $89.03 on May 9, 2016
- 36% over the three-month volume weighted average share price
- 33% over the six-month volume weighted average share price
- Last 12 months earnings before interest, taxes, depreciation and amortization (EBITDA) multiple of 15.8x as of February 29, 2016

The acquisition of Monsanto would be a compelling opportunity to create a global agriculture leader, while reinforcing Bayer as a Life Science company with a deepened position in a long-term growth industry. The combination is expected to provide Bayer’s shareholders with accretion to core earnings per share (EPS) by a mid-single-digit percentage in the first full year after closing and a double-digit percentage thereafter. Initially, Bayer expects annual earnings contributions from total synergies of approximately $1.5 billion after year three plus additional integrated offer benefits in future years.