The stock in Monsanto Co. (MON, Financial) closed slightly at $127.83 a share, up 0.24%, following Bayer AG’s (OTCPK:BAYRY, Financial) announcement about its plans to complete the $63 billion merger before Friday.
The German global pharmaceutical and life sciences company counts on receiving all the remaining approvals from regulators by tomorrow.
Werner Baumann is the chairman of Bayer's board of management. He commented: “The acquisition of Monsanto is a strategic milestone in strengthening our portfolio of leading businesses in health and nutrition. We will double the size of our agriculture business and create a leading innovation engine in agriculture, positioning us to better serve our customers and unlock the long-term growth potential in the sector.”
Reuters reports that Bayer has raised funds through the issuance of a $7 billion rights offering for the financing of the Monsanto purchase.
The antitrust review has taken longer than expected. As part of the review, Monsanto reduced its financial burden and Bayer raised more than $4.8 billion by selling its stake in the plastic company, Covestro. Bayer raised about $7.6 billion from the sale of its seed and herbicide businesses. Therefore, the cash call needed for the acquisition of Monsanto is smaller than Bayer had originally anticipated. The $7.6 billion sale of Bayer's seed and herbicide businesses was required in order for the deal to receival approval from regulators.
So far this year, Monsanto has climbed 9% and has a market capitalization of $56.42 billion. Bayer has fallen 3% and has a market capitalization of $103.46 billion.
Monsanto is trading a mere 6 cents below the 52-week high of $127.89 per share and 12% off the 52-week low of $114.19. The stock in Monsanto has a price-book ratio of 7.28 times and a price-earnings ratio of 22.91 times.
Monsanto has a forward dividend of $2.16 per share for a yield of 1.72%.
Bayer is trading at $30.16 per share and has a 52-week range of $27.60 to $35.41 per share. The stock in Bayer has a price-book ratio of 2.3 times and a price-earnings ratio of 12.44 times. Bayer has a forward dividend of 86 cents per share for a yield of 2.81%.
The merger will raise core earnings per share with an annual double-digit percentage growth anticipated for 2021 and onwards. Also, the adjusted earnings before interest taxes depreciation and amortization (EBITDA) issue will be positively impacted, adding $1.2 billion annually starting in 2022.
Bayer will sell the products of the acquired company under Monsanto’s brand names.
(Disclosure: I have no positions in any security mentioned in this article.)
