Germany-based health and agricultural giant Bayer reached a deal to acquire seed and pesticide firm Monsanto for $66 billion in yet another jolt to a global agricultural sector that has been rocked by sluggish crop prices.
Bayer said Wednesday that it agreed to pay $128 per share in cash for St. Louis-based Monsanto after months of acquisition talks in which the pursuer sweetened its bid on multiple occasions.
Following a flurry of major deals in the ag sector, such as the tie-up of ag giants Dow Chemical and DuPont, regulatory scrutiny from the Obama administration and other governments could prove to be an obstacle for the Bayer-Monsanto accord.
But Bayer agreed to pay $2 billion if the deal collapses under anti-trust pressure, in what investors call a breakup fee. Bayer, which is financing the deal with a combination of its cash reserves and new debt, described the fee as reflective of "its confidence that it will obtain the necessary regulatory approvals."
Monsanto shares (MON) rose 0.8% in pre-market trading to $106.90, falling well short of the deal price, possibly reflecting skepticism that the deal will be finalized.
The companies said they expect the deal to be finalized by the end of 2017.
"This represents a major step forward for our crop science business and reinforces Bayer’s leadership position as a global innovation driven life science company with leadership positions in its core segments, delivering substantial value to shareholders, our customers, employees and society at large,” Bayer CEO Werner Baumann said in a statement.
It was not immediately clear what would happen to Monsanto CEO Hugh Grant, who called the deal "a testament to everything we’ve achieved" and said it would create an "innovation engine."
In 2015, the companies had combined agricultural revenue of 23 billion euros. They said they expect to save $1.5 billion in "synergies" within three years — a corporate term that typically includes cost costs and combined purchasing power.
The combined company's seeds division and North American headquarters will be based in St. Louis. Its pesticide and crop science division will be based in Monheim, Germany. The company said it will also have "an important presence" in Durham, N.C., a digital farming business headquartered in San Francisco and many other operations.
Bayer said it's too early to say whether job cuts will occur.
"Based on our preliminary analysis, and given the complementarity of the portfolios and geographic focus of both companies, we expect to maintain major sites in the U.S., as well as in Germany," Bayer said.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
Copyright 2016 WFAA