<nettime> Do I read "General Services" here? ...

[Patrice Riemens <patrice@xs4all.nl>]

Original to: 
http://www.reuters.com/article/us-monsanto-m-a-bayer-idUSKCN0YA054

Bayer offers to buy Monsanto in global agrochemicals shakeout

German drugs and chemicals group Bayer has made an unsolicited takeover 
proposal to U.S. seeds company Monsanto, aiming to create the world's 
biggest agricultural supplier and take advantage of converging 
pesticides and seeds markets.

Monsanto disclosed the approach on Wednesday before Bayer confirmed its 
move, though neither released proposed terms.

The $42 billion market capitalization of Monsanto means that the deal 
would be likely to eclipse ChemChina's planned acquisition of Swiss 
agrichemicals company Syngenta -- a target Monsanto itself pursued last 
year -- and could face U.S. antitrust hurdles.

A Monsanto statement said that its board was reviewing the proposal, 
which is subject to due diligence, regulatory approvals and other 
conditions. There is no assurance that any transaction will take place, 
it added. Bayer shares dropped more than 8 percent to a 2-1/2 year low 
of 88.39 euros in early Thursday trading, with some investors worried by 
the potential cost of a deal.

Monsanto shares were seen 7.6 percent higher at $104.50 in pre-market 
trades.

UBS Global Asset Management, which Reuters data shows is among Bayer's 
30 biggest investors, said it was "deeply concerned" about the burden on 
Bayer's finances from a takeover, saying it would prefer the companies 
to agree a joint venture or a nil-premium merger.

Deutsche Bank analysts said a deal could shift Bayer's center of gravity 
to agriculture, accounting for about 55 percent of core earnings, up 
from roughly 28 percent last year excluding the Covestro chemicals 
business Bayer plans to sell.

That would have a negative impact on sentiment among Bayer's 
healthcare-focused investor base, the bank said.

PRICE ESTIMATES

Bayer, which has a market value of $90 billion, said the merger would 
create "a leading integrated agriculture business", referring to Bayer's 
push to seek more synergies from combining the development and sale of 
seeds and crop protection chemicals.

Most of the major agrichemical companies are aiming to genetically 
engineer more robust plants and custom-build chemicals to go with them, 
selling them together to farmers who are struggling to contend with low 
commodity prices.

While no takeover price was mentioned by either company, Bernstein 
Research analyst Jeremy Redenius estimated that it would be 41.9 billion 
euros ($47 billion), plus 6.7 billion euros in assumed debt. He said 
that Bayer might need a 27 billion euro share issue to help to fund the 
purchase.

Citi analysts have said that Bayer would probably need to pay 14-16 
times Monsanto's core earnings, implying a takeover price including debt 
of 57 billion euros to 65 billion euros.

A sale of Bayer's stake in foam chemicals maker Covestro could raise 
about 4 billion euros, while its animal health business, which Bayer has 
said it might put on the block, could fetch up to 7 billion euros.

The proposal comes as ChemChina's deal for Syngenta faces regulatory 
review in the United States over concerns about the security of U.S. 
food supply.

Any deal between Bayer and Monsanto, which would be Bayer's largest by 
far and dwarf the 17 billion euro takeover of drugmaker Schering in 
2006, could raise U.S. antitrust concerns because of an overlap in seeds 
business, particularly in soybeans, cotton and canola, antitrust experts 
have said.

The proposal comes less than three weeks after Werner Baumann took over 
as Bayer chief executive, a sign of the power base he built in his 
previous role as strategy chief.

Bayer, the inventor of aspirin and maker of Yasmin birth control pills, 
is far more diversified than Syngenta or Monsanto, with products 
including cancer drugs, flea and tick collars for pets and Coppertone 
sunscreen. Some analysts have said a deal with Monsanto could lead to a 
break up of the group.

Bayer's crop science division has businesses in seeds, crop protection 
and non-agricultural pest control, potentially complementing Monsanto's 
seeds assets.

BAYER, BASF AMBITIONS

Both Bayer and German rival BASF SE have been looking to build scale in 
agrichemicals. Monsanto said after its failure to land Syngenta that it 
didn't need to do a deal, but it has also been involved in discussions.

Monsanto approached Bayer this year to express interest in the latter's 
crop science unit, in the form of an acquisition or joint venture, 
sources told Reuters in March.

Both Bayer and BASF had been exploring tie-ups with Monsanto for months 
but valuation concerns have made a deal elusive, sources have said.

Bayer is ranked No. 2 in crop chemicals, with an 18 percent market 
share, just behind Syngenta on 19 percent, industry data shows.

Monsanto is the leader in seeds, with a 26 percent market share, 
followed by DuPont with 21 percent. DuPont agreed last year to merge 
with Dow Chemical. Any Bayer-Monsanto deal would further reduce the 
number of major players in seeds and pesticides to four from six.

Morgan Stanley and Ducera Partners are financial advisers to Monsanto, 
the company said in its statement, while Wachtell, Lipton, Rosen & Katz 
is legal adviser.


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