Bayer, the pharmaceuticals and chemicals group, has announced a €6bn capital increase to finance its $66bn takeover of Monsanto, which cleared its last big regulatory hurdle last week.
The deal is set to create the world’s largest maker of seeds and pesticides by far. The combined company will have sales of about €20bn, based on 2017 figures.
The cash call is smaller than that for which Bayer initially planned because Monsanto cut its debt as the various antitrust investigations into the deal proceeded. Also, Bayer made more from selling down its stake in plastics maker Covestro than initially envisaged.
Bayer announced on Sunday evening that it would issue nearly 75m new shares, priced at €81 each, to existing investors — who will be able to acquire two new shares for every 23 Bayer shares they own — generating gross proceeds of €6bn.
Werner Baumann, chief executive, called it a “significant component of the financing for the acquisition of Monsanto and the final equity measure associated with this undertaking”.
The announcement came five days after the US Department of Justice approved the Monsanto deal, removing the last remaining significant obstacle to the largest outbound German takeover since Daimler-Benz acquired Chrysler for $38.6bn in 1998.
Bayer was obliged to make $9bn worth of divestments to BASF, the German chemicals firm, as a condition of DoJ approval, which Makan Delrahim, US assistant attorney-general, called the “largest merger divestiture ever required by the United States”.
The German company will have to divest businesses in which it and Monsanto compete directly, including its cotton, canola, soyabean and vegetable seed unit, along with its Liberty herbicide division, which competes with Monsanto’s Roundup.
Bayer will also have to sell its seed treatment business to allay vertical competition concerns, as well as some intellectual property and “pipeline” research and development projects.
Earlier this year the European Commission also gave the Monsanto acquisition the green light, after concluding that there would be “effective competition and innovation in seeds, pesticides and digital agriculture after this merger”.
After the DoJ announcement, Mr Baumann said Bayer had now obtained “almost all clearances which are conditions for closing the transaction” and that it expected to receive all remaining approvals for the deal “very shortly”.
The statement released by Bayer on Sunday evening said that senior bond issuances were also planned, with a total volume of up to €20bn.
It said it would use the capital increase and the bond issues to repay the syndicated loan it took out to acquire Monsanto. The subscription period will start next Wednesday and end on June 19, and trading in the shares will start on the German stock exchange on June 22.
BofA Merrill Lynch and Credit Suisse will be joint global co-ordinators of the capital increase, which will be underwritten by a consortium of 20 banks.