Bayer May Finally Be Buying Monsanto, But The Market Remains Hesitant
Earlier this week, Bayer AG (ADR) (OTC: BAYRY) announced an increased offer of $128 per share, fully cash, to Monsanto Company (NYSE: MON). Both boards of directors approved the deal, and the current price represents a premium of 44 percent to Monsanto's share price the day before Bayer AG's first written proposal.
Bayer "intends to finance the transaction with a combination of debt and equity," according to the press release, "with the equity component of approximately $19 billion is expected to be raised through an issuance of mandatory convertible bonds and through a rights issue with subscription rights. Bridge financing for $57 billion is committed by BofA Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan."
Over the week, shares of Monsanto have reacted, as evidenced by the below chart.
Perhaps surprisingly to some, Monsanto's stock was up only just over 1 percent to $107.68 a share on the news, with the market apparently not fully convinced the deal will actually go through due to regulatory worries. Furthermore, questions remain as to what kind of impact this new merged company will have on farmers.
However, Angie Setzer, market analyst and vice president of Grain for Citizens Elevator, told Benzinga, "Other than the short-term effects seen through the consolidation process (layoffs, product streamlining, etc.) I'm not sure farmers will see many waves from this merger." She further noted that there are "enough" choices for farmers making "more than enough" supplies available the marketplace. The Potash Corporation of Saskatchewan (USA) (NYSE: POT) and Agrium Inc. (USA)(NYSE: AGU) merger concerns her more for farmers than the Monsanto/Bayer deal.
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