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Bayer cuts value of Monsanto takeover

Chander Mohan
Chander Mohan

The much talked about agro-deal of the annum, saw some fluctuating numbers. The Monsanto deal is now valued at $63.5 billion.  Bayer has cut the value of its takeover of Monsanto by $2.5 billion. Bayer shares dropped 3.1 percent to 110.90 euros at 1034 GMT with some analysts citing weaker-than-expected consumer health care revenues after the company reported a 4 percent rise in third-quarter operating earnings, driven by gains in its prescription drug sales.

The Monsanto deal, valued at $63.5 billion including debt, down from an initial $66 billion, because the company lowered its financial liabilities, Bayer's finance chief said. The planned acquisition will boost Bayer's agriculture sales to the same level as its core health care business, but the move has not been universally popular among shareholders and has led those with a pharma focus, in particular, to sell out.

In September 2016, when the acquisition was announced, Bayer said in September 2016 when the deal was announced that it would raise $19 billion worth of fresh equity capital, some of which would be covered by about $4.7 billion in mandatory convertible notes issued in November 2016. Analysts had expected Bayer's cash call to be around $12 billion, but estimates have since dropped below $10 billion.

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 next year as it awaits antitrust approval for the Monsanto deal. The German firm has agreed to sell seed and herbicide businesses for about $7 billion to BASF to appease antitrust regulators and has also been selling down its stake in plastics unit Covestro. "We will examine whether and to what extent the equity component of the financing will change," Bayer Chief Executive Werner Baumann, the deal's main architect, commented.

Additional asset sales are expected to satisfy regulators. "By no means did the deal that was signed with BASF constitute the totality of antitrust divestitures," Baumann said. "The agencies will render their verdict on what the necessary remedies are. It's probably the first step and somewhat more is to come."  

Earlier this month European regulators pushed back the Jan. 22, 2018 deadline on the Monsanto approval process so that the companies can garner information they have been asked for.

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