Bayer Reveals $62 Billion All-Cash Offer for Monsanto

Image: Bayer AG corporate logo
The Bayer AG corporate logo is displayed on a building in Berlin, Germany.Markus Schreiber / AP

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By Christine Seib, CNBC and Jessica Hartogs, Special to CNBC

Bayer has offered $122 per share for Monsanto in an all-cash deal that values the U.S. company at $62 billion, according to a statement released Monday.

The Bayer statement said the bid was at a 37 percent premium to Monsanto's May 9 closing share price of $89.03. Talks between the German drugs company and the U.S. agri-chemicals-maker were revealed on May 19.

The Bayer AG corporate logo is displayed on a building in Berlin, Germany.Markus Schreiber / AP

Bayer said that it expected the deal to provide its shareholders with mid-single-digit percentage accretion to core earnings per share in the first full year after the deal closed. This would increase to a double-digit percentage afterward, the company said.

Bayer said it expected annual earnings contributions from synergies to be worth about $1.5 billion three years after the deal closed.

The German company said it would finance the deal with a combination of debt and equity, with the equity portion to represent about 25 per cent of the deal's value. The cash would be raised mainly via rights offering, Bayer said. Bank of America Merrill Lynch and Credit Suisse were financing the deal, it added.

"What we are seeing is that the corporates in the U.S. have been leveraging steadily over the last two or three years ... the rest of the world is only catching up to the U.S. in terms of beginning to leverage their balance sheets so I would expect a lot more M&A activity outside of the U.S.," Ashok Shah, director of asset management company London & Capital, told CNBC on Monday."Most sectors got through these kinds of phases when you have a lot of reorganization within the sector and that is a lot to do with the maturity of the product profile of the stuff that's being sold to the customer," added Shah.

The Monsanto logo.FRANZ-PETER TSCHAUNER / AFP - Getty Images, file

Meanwhile, Julien Jarmoszko, senior research manager at S&P Global Market Intelligence, told CNBC that he could see the new group generating around $7 billion of free cash flow annually per dividends.

"That will be compared against around $40 billion of debt which means they can pay down the debt in seven years really," he said.