German drugs and chemicals group Bayer said Monday it had offered $62 billion (55 billion euros) for US agrochemicals giant Monsanto. Should the transaction be finalized, the merger would create the world's biggest producer of pesticides, seeds and fertilizers. 
 
 Bayer said in a statement it had made a cash offer of $122 per share, following weeks of speculation about a possible tie-up. 
 
 Monsanto had first disclosed Bayer's approach last Wednesday, but neither side had provided details on any proposed terms of the deal. 
 
 Bayer said it was in advanced discussions with banks about financing the deal, and said any money it would have to borrow to finalize the deal could be quickly repaid due to "the strong cash-flow generation of the combined business, as well as Bayer's track record of disciplined deleveraging after large acquisitions." 
 
 Bayer also plans to raise a round of fresh equity capital from investors to help finance the deal. Company CEO Werner Baumann said he did not foresee having to sell off any of Bayer's portfolio of businesses to finance the Monsanto deal. 
 
 Investor concerns 
 
 Monsanto's huge market capitalization means that the transaction would most likely eclipse ChemChina's planned acquisition of Swiss agrichemicals company Syngenta. But Bayer's move was expected to face US antitrust hurdles, analysts said. 
 
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 Deutsche Bank said the proposed deal could shift Bayer's center of gravity to agriculture, which henceforward would account for about 55 percent of core earnings. The German firm's healthcare-focused investor base would be unhappy about such a shift, the lender argued. 
 
 Most major agrichemical companies have been aiming to genetically engineer crop plants resistant to custom-formulated herbicides and pesticides, which allows farmers to use those chemicals to kill all plants in an area except the crop plant, as well as any insects. The result: Monocultures free of biodiversity. 
 
 Agrochemical companies sell package deals composed of both genetically modified seeds and the corresponding herbicides and pesticides to farmers, generating enormous cash-flow world-wide. 
 
 Reputational risk 
 
 Environmental activists have questioned the wisdom of Bayer's takeover offer, noting that Monsanto has a very negative image amongst people whose opinions align with "green" discourse. Most "greens" oppose genetically modified organisms and favor organic farming, free of synthetic herbicides or pesticides, over industrial agrochemical farming. 
 
 Monsanto's reputation is closely linked to genetically modified seeds and to pesticides and herbicides - including glyphosate, around which a controversy is currently raging in Europe over ambiguous evidence suggesting it could be considered cancer-causing or endocrine-disrupting. Glyphosate is one of Monsanto's major sources of revenue, and there is a risk it might eventually be banned. 
 
 "Gene technology and pesticides are not technologies of the future, but ones of risk," said Anton Hofreiter, head of the Green Party in the German parliament. "Doing this [merger with Monsanto] will put the lie to Bayer's talk of a sustainable corporate culture." 
 
 hg/jd (Reuters, AFP) 

 FRANKFURT (Reuters) - German drugs and crop chemicals group Bayer AG has offered to buy U.S. seeds company Monsanto for $62 billion in cash, defying some of its own shareholders in a bid to grab the top spot in a fast-consolidating farm supplies industry. 
 
 Monsanto Co’s stock ended trading up 4.4 percent at $106 on the New York Stock Exchange on Monday, well below Bayer’s $122 per share cash offer price, in a sign that it faces a tough task convincing the St. Louis-based company to sign off on the deal. 
 
 Monsanto has said it would review the proposal. Some analysts have suggested Bayer might still have to pay more. 
 
 “The price that has now been disclosed is at the upper limit and it is just about economical. Should it rise further, which is to be assumed, the takeover will become increasingly unattractive,” said Markus Manns, a fund manager at Union Investment, Bayer’s 14th biggest investor 
 
 Other Bayer shareholders have also responded coldly to the company’s pursuit, condemned by one Bayer investor as “arrogant empire-building” when news of the proposal emerged last week. 
 
 The unsolicited proposal would be the largest all-cash takeover on record, according to Thomson Reuters data, just ahead of InBev’s $60.4 billion offer for Anheuser-Busch in June 2008. 
 
 The move would also eclipse a planned combination of peers Dow Chemical and DuPont’s agriculture units and comes just three weeks after Werner Baumann took over as Bayer CEO. 
 
 Giving details for the first time, Bayer said on Monday it would offer $122 per share, a 37 percent premium to Monsanto’s stock price before rumors of a bid surfaced. 
 
 “We fully expect a positive answer of the Monsanto board of directors,” Baumann told reporters on a conference call, describing criticism from some investors as “an uneducated reaction in the media” when deal terms were not yet known, and driven by an element of surprise. 
 
 Monsanto, which said last week it had a received an approach from Bayer but gave no details, declined to comment. 
 
 Seven of Monsanto’s top 20 investors declined to comment about Bayer’s offer when contacted by Reuters. Others could not be immediately reached for comment. 
 
 Antitrust experts see an overlap in the seeds business, particularly in soybeans, cotton and canola. Bayer’s LibertyLink line of weed killers, plus crops that are resistant to it, are an important alternative for farmers suffering from weeds that have grown resistant to Monsanto’s Roundup herbicide. 
 
 Shares of Bayer, which had already fallen 14 percent since rumors of a bid emerged last week, ended trading down 5.7 percent on Monday to a new 2-1/2 year low of 84.42 euros. 
 
 The corporate logo of Bayer is seen at the headquarters building in Caracas March 1, 2016. Picture taken March 1, 2016. REUTERS/Marco Bello/File Photo T 
 
 “FULL PRICE” 
 
 Global agrochemicals companies are racing to consolidate, partly in response to a drop in commodity prices that has hit farm incomes, and also due to the growing convergence between seeds and pesticides markets. 
 
 ChemChina is buying Switzerland’s Syngenta for $43 billion after Syngenta rejected a bid from Monsanto, while Dow and DuPont are forging a $130 billion business. 
 
 With German rival BASF SE also looking into a possible tie-up with Monsanto, Bayer has moved to avoid being left behind. 
 
 Baumann rejected suggestions from some investors that Bayer should instead try to forge a joint venture with Monsanto, saying this would have tax disadvantages. 
 
 Monsanto approached Bayer in March to express interest in its crop science unit, Reuters reported at the time. Among the possibilities discussed were an outright acquisition of the crop science unit and a joint venture, or other type of partnership between the two companies. 
 
 Sources close to the matter have said BASF is unlikely to start a bidding war with Bayer. BASF declined to comment on Monday. 
 
 But analysts say Bayer might still have to pay more to persuade Monsanto and its shareholders to sell up. 
 
 That could be a problem, with some saying Bayer’s proposal, at 15.8 times Monsanto’s earnings before interest, tax, depreciation and amortization (EBITDA) for the year ended Feb. 29, is already a stretch for the German company. 
 
 Berenberg analyst John Klein said Monsanto and its shareholders were likely to argue that based on 2017 EBITDA expectations, the bid would represent a multiple of only 14 times, compared with the nearly 16 times ChemChina agreed to pay for Syngenta When pressed by analysts whether Bayer might sweeten its bid, Baumann said the offer reflected Monsanto’s value. 
 
 “We are putting forward a very, very full price,” he said. 
 
 AMBITIOUS SYNERGIES 
 
 Bayer said it would finance the bid with a combination of debt and equity, primarily a share sale to existing investors. Equity would account for about a quarter of the deal value. 
 
 Equinet analyst Marietta Miemietz, who has a ‘buy’ rating on Bayer stock, said the extra debt appeared manageable but could limit Bayer’s ability to invest in its healthcare business, which some analysts think needs a boost to its drugs pipeline. 
 
 Baumann said Bayer would continue to develop its healthcare arm, which includes stroke prevention pill Xarelto and aspirin, the painkiller it invented more than a century ago. 
 
 Monsanto is displayed on a screen where the stock is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. on May 9, 2016. REUTERS/Brendan McDermid/File Photo 
 
 “We are not feeding Peter by starving Paul here,” he said, adding no asset sales were planned to help pay for the deal. 
 
 Bayer also forecast synergies from a deal with Monsanto would boost annual earnings by around $1.5 billion after three years, plus additional future benefits from integrated product offerings - a reference to its push to combine the development and sale of seeds and crop protection chemicals. 
 
 Berenberg analysts, who have a ‘buy’ rating on Bayer shares, described the synergies estimate as “very ambitious”. 

 Image copyright AFP 
 
 German drugs giant Bayer has made a $62bn (£43bn) offer for Monsanto, in a deal that would create the world's biggest agricultural supplier. 
 
 Bayer said the bid was an "extraordinary opportunity to create a global agriculture leader." 
 
 Monsanto is primarily known for genetically modified crops, often leading to vocal activist criticism. 
 
 Last week, news of the deal angered Bayer investors, with one describing it as "arrogant empire-building". 
 
 The offer marks the biggest ever bid by a German company, dwarfing the Daimler's $38.6bn acquisition of Chrysler in 1998. 
 
 John Colley, a Professor of Practice at Warwick Business School, said it was an unusual approach for a German firm, which he said typically opted for lower risk expansion. 
 
 "The Bayer bid is clearly designed to leave the board of Monsanto with little room for manoeuvre. The large cash bid means - despite Monsanto's dislike of European ownership - they will appear as though self interest is prevailing if they reject it. 
 
 "Few megabids go well and research shows more than half destroy value, and only around a quarter deliver on their promises," he said. 
 
 Image copyright Joe Raedle, Getty Images Image caption Bayer is better known for its pharmaceutical products 
 
 Bayer's farm business produces seeds as well as compounds to kill weeds, bugs and fungus, but it is better known for its healthcare products such as Asprin and Alka-Seltzer. 
 
 Analysts said if the deal went through, almost half of the merged firms' business would be agriculture, a mix likely to displease investors who had bought shares in Bayer for its pharmaceutical offering. 
 
 Bayer's shares, which fell 8% when the merger talks were announced last week, fell 3% in early trading. 
 
 The offer comes amid a wave of mergers in the industry. 
 
 'Perfect match' 
 
 Rivals Dow Chemical, DuPont and Syngenta have all announced tie-ups recently, although they have yet to be cleared by regulators. 
 
 The drop in commodity prices has put pressure on firms such as Monsanto, with farmers' cutting orders for supplies. 
 
 Bayer said the offer of $122 per share represented a 37% premium on the price of Monsanto shares before rumours about the takeover bid emerged in the media. 
 
 "Monsanto is a perfect match to our agricultural business. We would combine complementary skills with minimal geographic overlap. 
 
 "At the same time, ongoing consolidation activities in the industry make this combination by far the most attractive one," Bayer's chief executive Werner Baumann said in a statement. 
 
 He said he was confident that the Monsanto board would accept the offer, saying "we fully expect a positive answer". 
 
 Both companies had confirmed last week that they were in talks over a possible deal. 
 
 Industry mergers 
 
 Bayer has a market value of about $90bn, making it the second-largest producer of crop chemicals after Syngenta. 
 
 Monsanto, which has a market capitalisation of $42bn, attempted to buy Swiss rival Syngenta last year. 
 
 However, Syngenta ended up accepting a $43bn offer from ChemChina in February, although that deal is still being reviewed by regulators in the US. 
 
 After the unsuccessful bid, Monsanto announced plans to cut 3,600 jobs by the end of next year in a massive restructuring. 
 
 Bayer's acquisition of Monsanto is expected to be bigger in value than the ChemChina-Syngenta deal. 
 
 The biggest merger in the chemicals industry took place late last year when Dow Chemical teamed up with Du Pont to form a new $130bn company.
– A German company, in a country that's definitely no fan of genetically modified crops, has offered to buy the world's biggest producer of the seeds they come from for $62 billion—in cash. Bayer on Monday said its offer of $122 a share is a 37% premium over Monsanto's closing price on May 9; Bayer's unsolicited proposal came the next day. Four things to know: A successful merger would create the world's largest agribusiness, trumping the would-be DowDuPont; the two have a combined market value of $132 billion. Bayer called the move a "compelling opportunity to create a global agriculture leader." But one major shareholder condemned the move, calling it "arrogant empire-building." Bayer's share price has fallen 14% since word of the bid trickled out last week, reports Reuters, with a 3.6% drop occurring early Monday. That brings Bayer's share price to a 30-month low. Why the drop? For one, Bayer is a two-headed company: It makes herbicides and pesticides, but it's thought of as a pharma company, one that invented aspirin and sells Alka-Seltzer. Deutsche Welle cites Deutsche Bank's assertion that a merger would mean about 55% of the combined company's "core earnings" would come from agriculture. As the BBC puts it, that mix is "likely to displease investors who had bought shares in Bayer for its pharmaceutical offering." Second, there's the matter of how Bayer would finance such a deal: with debt and equity. "We will increase our debt level on our balance sheet substantially," explained Bayer's CFO, with the expectation that "strong cash flows" would allow for quick debt reduction. One analyst puts the expected debt level at about $45 billion, per the Wall Street Journal, which reports Bayer's net debt was about $20 billion last year.