Whether shareholders are smiling is less clear. Monsanto’s stock fell 2% on Thursday morning, more than the 0.6% it had risen on Wednesday on news that the deal had been agreed. That takes the shares to $104.75, an 18% gain since Bayer’s first offer was announced, but less than half way to the $128 offer — suggesting a big doubt that regulators will approve it.
What the deal means for farmers, food consumers and shareholders will be thrashed out through months of hard investigation and negotiation with authorities in 30 countries.
Bayer shareholders may relish the prize of holding a world leader, but the $2bn break fee Baumann has offered Monsanto may give them some uncomfortable doubts. On balance, most are likely to judge that in an agrochemical market thick with consolidation, there’s a good chance the firms can sell assets to placate regulators. What would derail the merger is a political revolt against it, for example in the US.
For the capital markets, however, the deal is an unequivocal win. To make its offer clean and simple, Bayer has offered all cash — a huge vote of confidence in its ability to raise capital.
Five funding markets — loans, senior and hybrid bonds, mandatory convertibles and equity through a possibly record breaking rights issue of $12bn-$15bn — will be given the chance to show off their strengths.
There’s a long way to go before the financing is completed, but the auguries are good. It’s the kind of deal that moves the market’s perception of what is possible.