Bayer's winning smile rhymed with "biggest all-cash deal in history" at $128 a share. Bayer plans an equity component of about $19B and a bridge loan of $57B from some of the usual suspects, Bank of America Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JPMorgan. Morgan Stanley and Ducera partners are financial advisor to Monsanto, BofA Merrill and Credit Suisse to Bayer. Bayer already has a lot of debt but all-cash deal means they dodge a shareholder vote which if equity rose above around $22B would have needed a 75% supermajority and the going looked tough. Hence cash deal, no vote, no issuance of new Monsanto shares. Put those protest-poster-kits away boys and girls. Name of of merged company not settled, Monsanto was said to be "flexible" on that issue. Hmm, yes, well. A rose by any other name is still a furtherance of consolidation in the already massively consolidated agrochemical sector. Farmers around the world are not thrilled as the crunching of seed and fertilizer options homes in on them. We've just seen Dow Chemical and duPont get hooked up, and ChemChina has bought the Swiss giant Syngenta. So six behemoths become four in less than a year. Down the rabbit hole anyone? http://blogs.wsj.com/briefly/2016/09/14/bayers-deal-for-monsanto-at-a-glance/ The spate of deals announced over the past 10 months would place more than 80% of U.S. corn-seed sales and 70% of the global pesticide market under just three companies, sparking fresh concerns about the pricing power of the sector’s largest players as low crop prices are squeezing farmers’ incomes. And there's a two billion dollar breakup fee. And, they'll have to file for regulatory approval in about 30 jurisdictions. More details... http://www.nytimes.com/2016/09/15/business/dealbook/monsanto-bayer-deal.html http://www.reuters.com/article/us-monsanto-m-a-bayer-deal-idUSKCN11K128 http://www.ft.com/cms/s/0/e02ef0d4-7a6e-11e6-ae24-f193b105145e.html http://blogs.wsj.com/cfo/2016/09/07/bayer-moving-outside-of-comfort-zone-with-monsanto-bid/ http://blogs.wsj.com/cfo/2016/09/14...-debt-to-avoid-shareholder-vote-analysts-say/ Assuming the merger survives regulatory scrutiny, one of the WSJ blog pieces noted that ratings agencies may downgrade the merged entity to BBB if Bayer declines to exercise assorted options to get the debt load down... $57B in additional debt means $57B in additional debt, no matter how Bayer structures that skimpy equity component. It's said to be planned as mandatory convertible bonds, senior and subordinate bonds and a subscription rights issue. Value-wise the deal looks a little pricey for the cost of empire, as NYT's BreakingViews has noted: http://www.nytimes.com/2016/09/15/business/dealbook/big-bayer-monsanto-deal-lags-in-value.html Bayer would be paying a $17 billion premium to Monsanto’s market capitalization on May 11, the day before talks between the two were first reported. Yet the value created by the deal, after taxing and capitalizing the annual savings of $1.5 billion, is just $12 billion. That value gap might explain why Bayer’s shares have flagged. As of Wednesday, the company’s market capitalization was slightly lower than on May 11. Yet the MSCI World Industrials and Health Care indexes are both up more than 2 percent over the same period. If Bayer shares simply tracked the benchmark, the company would be worth over $7 billion more than it was by midafternoon London time on Wednesday. Broadly speaking, that makes sense because Bayer is paying away all the benefits of the deal, and then some, to Monsanto shareholders. Well as usual there is a rosy picture for the guy at the top. Hugh Grant, the Monsanto exec, will get around $226M mostly from vested shares and options but also severance if he goes away. And of course if he doesn't go away, and just because the merger itself goes away, well there's that handy $2B breakup fee to shore up any disappointment over having to stick around and run Monsanto after all... Well I guess Donald and Hillary will be asked by media to comment in detail on this deal, eh?