MERGERS AND ACQUISITIONS
Bayer reduces value of Monsanto deal by $2.5bn
Frankfurt — German drug maker Bayer has cut the value of its takeover of Monsanto by $2.5bn, which combined with windfalls from asset sales means it may have to raise less from shareholders.
The Monsanto deal was now valued at $63.5bn including debt, down from $66bn, after the US seeds giant lowered its financial liabilities, Bayer’s finance chief said on Thursday.
The planned acquisition will boost Bayer’s agriculture sales to the same level as its core healthcare business, but the move has not been universally popular among shareholders and has led those with a pharmaceutical focus, in particular, to sell out.
Bayer said in September 2016 when the deal was announced that it would raise $19bn worth of fresh equity capital, some of which would be covered by €4bn in mandatory convertible notes issued in November 2016.
Analysts had expected Bayer’s cash call to be about $12bn, but estimates have since dropped below $10bn.
"We will examine whether and to what extent the equity component of the financing will change," Bayer CEO Werner Baumann said on Thursday. Bayer reiterated that the capital increase would take place via a rights issue so as not to water down existing investors and said the transaction would not take place before 2018 as it awaited antitrust approval.
The German firm has agreed to sell seed and herbicide businesses for €5.9bn to BASF to appease antitrust regulators and has also been selling down its stake in plastics unit Covestro.
Finance chief Johannes Dietsch said that cutting Bayer’s stake in Covestro to below 25% had grossed about €2.5bn more in proceeds than expected.
But Bayer was no longer keen on using hybrid bonds to fund the Monsanto deal, Dietsch said, so shareholders could be asked to stump up more cash.
Earlier in October, European regulators pushed back the January 22 2018 deadline on the Monsanto approval process so that the companies could garner the information they have been asked for.