Bernstein Research analysts said on Tuesday they saw only a 50 percent chance of the deal winning regulatory clearance, although they cited a survey among investors that put the likelihood at 70 percent on average
“We believe political pushback to this deal, ranging from farmer dissatisfaction with all their suppliers consolidating in the face of low farm net incomes to dissatisfaction with Monsanto leaving the United States, could provide significant delays and complications,” they wrote in a research note.
Bayer said it was offering a 44 percent premium to Monsanto’s share price on May 9, the day before it made its first written proposal.
It plans to raise $19 billion to help fund the deal by issuing convertible bonds and new shares to its existing shareholders, and said banks had also committed to providing USD 57 billion of bridge financing.
Bayer shares were up 2.2 percent at 95.32 euros. Monsanto’s were up 0.2 percent at USD 106.3 in premarket trade.
Bayer’s move to combine its crop chemicals business, the world’s second largest after Syngenta, with Monsanto’s industry leading seeds business, is the latest in a series of major tie-ups in the agrochemicals sector.
The German company is aiming to create a one-stop shop for seeds, crop chemicals and computer-aided services to farmers.
That was also the idea behind Monsanto’s swoop on Syngenta last year, which the Swiss company fended off, only to agree later to a takeover by China’s state-owned ChemChina.
Elsewhere in the industry, US chemicals giants Dow Chemical and DuPont plan to merge and later spin off their respective seeds and crop chemicals operations into a major agribusiness.
The Bayer-Monsanto deal will be the largest ever involving a German buyer, beating Daimler’s tie-up with Chrysler in 1998, which valued the US carmaker at more than USD 40 billion. It will also be the largest all-cash transaction on record, ahead of brewer InBev’s $60.4 billion offer for Anheuser-Busch in 2008.
Bayer said it expected the deal to boost its core earnings per share in the first full year following completion, and by a double-digit percentage in the third year.
Bayer and Monsanto were in talks to sound out ways to combine their businesses as early as March, which culminated in Bayer coming out with an initial USD 122 per-share takeover proposal in May.
Antitrust experts have said regulators will likely demand the sale of some soybeans, cotton and canola seed assets as a condition for approving the deal.
Bayer said Bank of America/Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan had committed to providing the bridge financing. Bank of America/Merrill Lynch and Credit Suisse are acting as lead financial advisers to Bayer, with Rothschild as an additional adviser. Bayer’s legal advisers are Sullivan & Cromwell and Allen & Overy.
Morgan Stanley and Ducera Partners are acting as financial advisers to Monsanto, with Wachtell, Lipton, Rosen & Katz its legal adviser.