Bayer completes US$63b Monsanto takeover

German chemicals and pharmaceuticals giant Bayer seals a US$63-billion merger with US-based Monsanto.

"We will be even better placed to help the world's farmers grow more healthy and affordable food in a sustainable manner," chief executive Werner Baumann said in a statement.

The German firm will pay owners of Monsanto stock US$128 per share immediately.

But combining operations cannot begin until Bayer has ceded existing seeds and pesticides activities to rival BASF, concessions agreed in lengthy negotiations with competition authorities in Washington and Brussels.

Executives are betting big on projections that around 10 billion people will live on Earth by 2050, meaning more food must grow on the same amount of arable land.

They say that can best be achieved with technologies rejected by green organisations and politicians, including genetically-modified (GM) seeds designed to resist strong pesticides.

Modified crops and digital tools to help farmers adapt to the weather and monitor the health of their fields could also help swell harvests threatened by climate change.

While CEO Baumann promised the Bayer-Monsanto marriage would "create significant value" for shareholders, he added that "our sustainability targets are as important to us as our financial targets."

German business daily Handelsblatt asked on Thursday "whether Bayer is strong enough to do the splits."

"On the one side is the business necessity to make as much money as possible with plant protection chemicals and seeds as investors demand. On the other, Bayer must earn trust among a public that's increasingly sceptical about industrial agriculture."

MONEY WHERE YOUR MOUTH IS

Following Dow and DuPont's 2017 tie-up and ChemChina's acquisition of Swiss firm Syngenta, the Bayer-Monsanto marriage is the latest of three mega-mergers in the chemical industry that have created mammoths in Europe, the US and Asia.

"Fewer and fewer firms are sharing out power over farming and groceries... determining what arrives on our plates at what price," the Heinrich Boell Foundation, close to Germany's Greens party, warned last year.

Launched in 2016, the deal will create a global giant with 115,000 employees and annual revenues of €45 billion (US$53 billion).

Competition authorities forced Bayer to sell seeds and agrichemical business with revenues of around €2.2 billion per year to rival BASF before allowing the deal.

Even taking that into account, Bayer and Monsanto's agriculture arms boasted combined sales of €19.7 billion last year, far outstripping DowDuPont and ChemChina.

In its new form Bayer will earn around half its revenue from prescription and over-the-counter medications and half from agriculture.

While they hailed a "sound strategic rationale" for the deal and "robust long-term fundamentals" in the agrichemical sector, ratings agency Moody's downgraded Bayer's debt earlier this week.

Bayer will have to demonstrate "timely delivery of the merger synergies" executives hope will add US$1.2 billion per year to operating profits as well as expanding other business areas to escape a "negative" outlook for its debt, Moody's said.

WHAT'S IN A NAME?

Bayer is as keen to ease pressure from environmentalists and politicians as it is to satisfy investors.

A worldwide backlash against "industrial agriculture" and Monsanto in particular prompted executives to announce this week that the name will be abandoned.

Campaigners have battled for decades against the St Louis-based firm and its products, including controversial herbicides like glyphosate, suspected of causing cancer and the subject of a huge political row in the European Union.

Meanwhile Monsanto's GM seeds have met fierce resistance in Europe and elsewhere around the world, pushing Bayer into a 2016 promise not to introduce modified crops on the Old Continent.

"We will listen to our critics and work together where we find common ground," Baumann told journalists on Monday.

But "agriculture is too important to allow ideological differences to bring progress to a standstill," he added.

Monsanto products like glyphosate-containing Roundup or seed brands like Dekalb and De Ruiter will remain unchanged following the merger.

"The model of development that underpins Bayer's purchase of Monsanto is diametrically opposed to the transition from our production-driven model to a more sustainable one that respects the environment, as citizens are hoping for," Eric Andrieu, agriculture spokesman for the Socialist group in the European Parliament tweeted Thursday.

Shares in Bayer slightly underperformed the DAX index of blue-chip German shares around after 1315 GMT, losing 0.2 per cent to trade at €99.17 against a flat market.