Bayer AG agreed to buy Monsanto Co. in a deal valued at $66 billion, winding up four months of talks to create the world’s biggest supplier of seeds and pesticides.
Bayer will pay $128 a share in cash, the company said in a statement Wednesday. The bid”•this year’s biggest deal and the largest foreign takeover ever by a German company”•is 21 percent above Monsanto’s closing price on Tuesday in New York. Bayer also agreed to pay Monsanto a break-up fee of $2 billion if the deal is rejected on antitrust grounds.
The transaction caps a dramatic reshaping of the crop and seed industry. A year ago, the sector had at least a half-dozen global players. After Bayer and Monsanto tie up, creating a leader with $26 billion in combined revenue from agriculture, that number will shrink to just four.
Falling crop prices and a quest for greater efficiency have triggered a cascade of deals over the past year. Last December DuPont Co. and Dow Chemical Co. agreed to merge and then carve out a new crop-science unit. And in February, China National Chemical Corp. agreed to acquire Switzerland’s Syngenta AG, which Monsanto had pursued for years.
The deal values Monsanto at almost 21 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. That compares to a median of about 9.4 times for comparable deals.
Bayer will fund the transaction with a combination of debt and equity. The equity component of about $19 billion will be raised through an issuance of mandatory convertible bonds as well as a rights offer. In the meantime, Bank of America Corp., Credit Suisse Group AG, Goldman Sachs Group Inc., HSBC Holdings Plc and JPMorgan Chase & Co. agreed to provide bridge financing of $57 billion.
Bank of America, Credit Suisse and Rothschild & Co. advised Bayer on the transaction, while Morgan Stanley and Ducera Partners LLC acted for Monsanto.