October 26, 2017 / 5:51 AM / 3 years ago

Bayer cuts Monsanto deal value to $63.5 billion on revised debt

FRANKFURT (Reuters) - German drugmaker Bayer has cut the value of its takeover of Monsanto by $2.5 billion, which combined with windfalls from asset sales means it may have to raise less than expected from shareholders.

FILE PHOTO - The corporate logo of Bayer is seen at the headquarters building in Caracas May 6, 2015. REUTERS/Carlos Garcia Rawlins/File Photo

The Monsanto deal is now valued at $63.5 billion including debt, down from an initial $66 billion, because the U.S. seeds giant had lowered its financial liabilities, Bayer’s finance chief said on Thursday.

The planned acquisition will boost Bayer’s agriculture sales to the same level as its core healthcare business, but the move has not been universally popular among shareholders and has led those with a pharma focus in particular to sell out.

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 4 billion euros 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.

“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, said on Thursday.

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 5.9 billion euros ($7 billion) to BASF to appease antitrust regulators, and has also been selling down its stake in plastics unit Covestro.

Bayer’s finance chief Johannes Dietsch said that cutting its stake in Covestro to below 25 percent had grossed about 2.5 billion euros more in proceeds than expected.

But Bayer was no longer keen on the idea of using hybrid bonds to fund the Monsanto deal, Dietsch said, meaning that shareholders could be asked to stump up more cash.

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.


Bayer shares dropped 3.1 percent to 110.90 euros at 1034 GMT with some analysts citing weaker-than-expected consumer healthcare revenues after the company reported a 4 percent rise in third-quarter operating earnings, driven by gains in its prescription drug sales.

Bayer’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at 2.2 billion euros ($2.6 billion), slightly higher than the average forecast by analysts of 2.12 billion euros, helped by continued growth in prescriptions for anti-clotting drug Xarelto.

Adjusted EBITDA at the consumer health unit, owner of brands such as sunscreen Coppertone and allergy remedy Claritin, fell a weaker-than-expected 16.5 percent to 274 million euros.

Bayer said U.S. consumers were switching to online purchases, leading to declines in established drugstore footfall which its own e-commerce push was not offsetting fast enough. ($1 = 0.8453 euros)

Reporting by Ludwig Burger; Editing by Maria Sheahan and Alexander Smith

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