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James Li
James Li
Articles (481)  | Author's Website |

Bayer Closes Merger With Buffett’s Monsanto

Combined company expects to improve productivity and sustainability of agricultural companies

Bayer AG (XTER:BAYN)(BAYRY) announced on Thursday that it closed its merger with Monsanto Co. (NYSE:MON), a company Warren Buffett (Trades, Portfolio) invested in 7.26 million shares during the first quarter.

The German health care and chemical conglomerate acquired the St. Louis-based agriculture company for $66 billion, or $128 per share. JPMorgan Chase & Co. (NYSE:JPM) assisted Bayer with the transaction for “the largest acquisition in [Bayer’s] history,” according to the press release.

CEOs comment on landmark merger closing

Hugh Grant, outgoing chairman and CEO of Monsanto, said the closing represents a key milestone toward the company’s mission to create a major agriculture company that supports growers in efforts to increase productivity and sustainability for the benefit of the planet. Grant mentioned in a separate release that he will continue advocating the agricultural business following his tenure.

Bayer Chairman Werner Baumann mentioned how the closing positively affects the company’s customers, shareholders and consumers. Farmers around the world can harvest goods more efficiently, which can lead to higher short-term and long-term shareholder value. Additionally, the closing allows Bayer to assist farmers worldwide and “grow healthier and more affordable food in a sustainable matter.”

Bayer offers good growth potential for investors despite declining revenues

GuruFocus lists four positive investing signs for Bayer, including expanding operating margins, a strong Piotroski F-score of 7 and a dividend yield near a five-year high. The company’s operating margin of 17.60% is near a 10-year high and outperforms 74% of global competitors, which include GlaxoSmithKline PLC (NYSE:GSK), Eli Lily and Co. (NYSE:LLY), Bristol-Myers Squibb Co. (NYSE:BMY) and AbbVie Inc. (NYSE:ABBV).

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Despite high profit margins, Bayer’s profitability ranks just 6 out of 10 as the company’s three-year revenue growth rate of -7% underperforms 82% of global competitors. GuruFocus marked Bayer’s three-star predictability rank on watch as the company’s revenue has declined over the past five years.

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See also

GuruFocus launched detailed industry overview pages in April, allowing users to look at various metrics like median price-sales and median return on equity for a specific industry.

Disclosure: No positions.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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