Bayer’s Monsanto takeover less lucrative than expected

German pharma and chemicals giant Bayer said Friday that savings from its hoped-for takeover of US seeds and pesticides behemoth Monsanto will be smaller than previously thought.

Bayer's Monsanto takeover less lucrative than expected
People protesting against the Bayer-Monsanto merger in Hamburg earlier this month. Photo: DPA

The company expects the savings from splicing the two businesses together will amount to $1.2 billion (1.03 billion euros) per year from 2022 onwards.

That's short of the $1.5 billion trumpeted by executives when the merger plans were inked in September 2016.

Nevertheless, “I'm convinced that this acquisition has very great potential for creating value,” chief executive Werner Baumann told investors at the group's annual general meeting in Bonn.

Bayer has been forced by competition authorities including the European Commission to sacrifice existing activities in seeds and pesticides worth 7.6 billion euros to home-grown rival BASF in exchange for approval of the Monsanto deal.

That means there will be less overlap and fewer savings when Bayer assumes the US firm's product range of genetically-modified seeds and compatible pesticides.

The German firm needs to find some 44 billion euros in new cash — from borrowing and issuing new shares — to fund the $62.5-billion Monsanto takeover, German business daily Handelsblatt calculated Friday.

Lower savings from the merger will then mean less funds available to pay off the new debts.

“Bayer will indebt itself massively over Monsanto. But it's manageable if the agrochemical division plus Monsanto turns into the promised cash machine,” Handelsblatt judged.

Executives hope the one remaining major green light will come from the US Department of Justice before a June 14th deadline, after which Monsanto could withdraw from the deal if the needed approvals have not been secured.

“We anticipate being able to close the acquisition of Monsanto in the near future,” Baumann insisted.

Some 200 people demonstrated against the Bayer-Monsanto merger outside the AGM Friday, including a woman wearing a wedding dress and a skull mask holding a sign warning of a “deadly wedding” between the two firms.

“We can't allow gigantic companies to have control over our food system,” said Christian Rollmann of protest group “Wir haben es satt” (We're fed up).

READ ALSO: Bayer chief promises no Monsanto GM crops in Europe

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Bayer shareholders vote against board over Monsanto deal

Bayer chief executive Werner Baumann was dealt a blow on Friday at the German chemical giant's annual general meeting, amid tensions over last year's decision to buy US seeds and pesticides maker Monsanto, as disgruntled shareholders voted against management.

Bayer shareholders vote against board over Monsanto deal
Werner Baumann, chief executive of Bayer, speaks to shareholders on Friday. Photo: Guido Kirchner/dpa
At the AGM in Bonn, 55.5 percent voted against the management board, led by embattled CEO Werner Baumann, with just 44.5 percent of shareholders in favour – a huge drop down from 97 percent support last year.
The result is a slap in the face for Baumann and his management team, Although the vote carries no direct consequences, it is a clear statement by disgruntled shareholders.
Around 500 protesters gathered outside the Bonn conference centre with placards mocking Bayer's corporate motto “science for a better life” or calling to “stop glyphosate”, the Monsanto-made herbicide at the centre of the group's woes.
Inside, investors were fuming. “Bayer has choked on Monsanto,” said Ingo Speich of Deka bank. “The company risks being taken over and dismantled.”  Mark Tuemmler of investors' federation DSW said 2018 was “a nightmare for shareholders”.
'A scandal'
Bayer's share price fell last year by around 40 percent following its $63 billion takeover of Monsanto in June — the biggest in German history. At 57 billion euros, its market capitalisation is little higher than the price it paid to acquire Monsanto in the first place. “A scandal,” Tuemmler said.
Opening the meeting, Baumann acknowledged that some 13,400 US lawsuits relating to glyphosate and initial unfavourable judgements against Bayer “are placing a heavy burden on our company and worrying many people”.
Last year's share price plunge was driven by the first of two jury rulings so far that have awarded plaintiffs — cancer patients who had been exposed to glyphosate over long periods — $80 million each.
Baumann complained that such decisions had been based on a 2015 finding by World Health Organization arm IARC that glyphosate “probably” causes cancer.
“We remain convinced of the safety of glyphosate,” the CEO said, recalling regulators worldwide found no new evidence that the pesticide causes cancer in reviews prompted by the IARC judgement.
In the two cases already heard, “we remain optimistic that the next higher courts will reach different verdicts,” the CEO added, calling for “decisions based on scientific analysis — and not on emotions”.
The business case for the merger remained as strong as ever, he assured investors, with the merged companies now operating “leading businesses in chemical and biological crop protection, in conventional and biotech seed, and also in digital farming”.
And he reiterated the group's targets — including its pharmaceutical and over-the-counter medicines units — to increase sales four percent, to 46 billion euros ($51 billion) in 2019, with an operating profit before special items of 12.2 billion euros.
Current market reactions were “exaggerated” and did not reflect Bayer's “true value”, he said.
By around 3:00 pm (1300 GMT), Bayer had gained around one percent on the Frankfurt stock market to trade at 61.63 euros, outperforming the DAX index of blue-chip shares.