By Eyk Henning and Christopher Alessi
FRANKFURT–Germany’sBayer AG and Monsanto Co. are expected to announce a tie-up as early as Wednesday that would value the U.S. seed-maker at close to $ 130 a share, or more than $ 65 billion in total, according to people familiar with the matter.
Bayer’s supervisory board is set to meet Wednesday afternoon, where it is expected to rubber stamp the company’s latest takeover offer, these people said.
Bayer also “considerably” increased its break-fee from a previous figure of $ 1.5 billion, another person familiar with the deal said.
The expected agreement would come roughly four months after Bayer Chief Executive Werner Baumann made his first– and largely unexpected–bid for Monsanto. The German company initially offered $ 122 a share back in May.
Since then, Bayer raised its offer twice, including last week’s revised bid, but had so far failed to present Monsanto with a sufficiently high figure.
Mr. Baumann spent countless hours over the summer trying to convince skeptical investors on both sides that a deal would create value for the two companies. Many of his own shareholders questioned whether Bayer could afford such an acquisition given its high debt. The company’s net debt stood at EUR17.45 billion ($ 19.71 billion) last year, more than double the EUR7 billion in 2011.
Many investors had hoped the company would continue to expand its lucrative health-care operations.
The deal with Monsanto would significantly reshape Bayer’s portfolio, shifting it away from its core health-care operations. The group’s crop-science business would comprise roughly half of overall sales, compared with 30% in 2015. The health-care division, including the pharmaceuticals business, would constitute roughly the other half of group sales.
Bayer’s agrochemical division posted revenue of EUR10.4 billion last year, out of total group sales of EUR46.3 billion. Monsanto posted total sales of $ 15 billion in 2015.
Analysts widely expect Bayer and Monsanto to complete a deal, but some still question the merits of such a tie-up and whether it would overcome likely regulatory hurdles.
“We see the Bayer-Monsanto deal as close to an end,” analysts at Germany’sDZ Bank wrote in a note Wednesday morning. “We don’t like the transaction because we think that Bayer is overpaying significantly,” the analysts said.
Still, investors and analysts have noted that Bayer and Monsanto’s agricultural businesses are complementary. Bayer is much stronger in crop chemicals, while Monsanto is a world leader in seeds.
The deal, which would create one of the world’s largest agrochemicals businesses, is the latest in the rapidly consolidating agricultural sector.
Rival seed developers Syngenta AG, Dow Chemical Co. and DuPont Co. have all struck their own deals in recent months. Pressure has built on agrochemical groups to slash costs and build scale as farmers grapple with a three-year slide in crop prices that has forced makers of seeds, crop chemicals, fertilizers and tractors to cut prices and lay off staff.
Write to Eyk Henning at eyk.henning@wsj.com and Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires 09-14-160519ET Copyright (c) 2016 Dow Jones & Company, Inc.
Plantations International