Bayer-Monsanto Deal Analysis

Equit-I: Pre-Process

Name: Ahmed Mohammed Sadaqat

2018PGP489
 Company Profiling Deal Rationale
Monsanto
1. Monsanto Company provides agricultural products for
farmers and is divided into two business segments:
• Seeds and Genomics
• Agricultural Productivity
2. Seeds and Genomics drive the company’s growth with 74%
sales coming from the said division
3. Monsanto have a vision of a future with ‘Abundant Food and
a Healthy Environment’
4. 80% of the total area of global farmland planted with GM
crops in 1999
5. Monsanto are also the second largest seed company in the
world with global sales of $1,700 million
6. “RoundUp”, manufactured by Monsanto, is the world’s
biggest selling herbicide
7. In accounting year 2017, the net sales for Monsanto was
14.6 billion dollars
8. The Earning per Share for the said accounting year was 5.5
dollars, up by 1.02 dollars from the previous year
9. Free Cash Flow for the company in the accounting year
2017 was 1.99 billion dollars up by 19% from previous year
Monsanto: Valuation
Bayer
1. Bayer is a global life science company with 150 years of
history with four major divisions:
• Pharmaceuticals
• Consumer Health Branding agency “Interbrand” valued the
Bayer brand at €6.3 billion
• Crop Science and
• Animal Health
2. Objective: Create value for our customers, stockholders and
employees, while also strengthening the company’s earning
power
3. Values: Committed to operating sustainably and addressing
our social and ethical responsibilities
4. Division of Interest: Bayer’s Corp Science division is the
world’s third largest in sales of agricultural chemicals and
products with annual revenue around $9 Billion
5. Total Revenue for the accounting year 2017 35,015 million
Euros, with increment of 0.2% from the previous year
6. Net Income from operating activities for the same accounting
year was 7,336 million Euros, up by 61.9% from the previous
year
7. Total dividend payout was 2,315 million Euros, an increment
of 3.7% from the previous year – 2.8 Euro per share
 Company Profiling Deal Rationale Monsanto: Valuation

Monsanto – Core Competencies Bayer – Core Competencies

1. Top Seeds and Traits portfolio 1. Top Crop Protection portfolio

2. Agricultural “Yield” is the center of focus 2. Plant health at the center of focus
3. Breeding and trait development focus 3. Excellence in Chemistry
4. Advanced digital farming platform 4. Accessibility to complete Life Sciences Platform

Bayer + Monsanto

1. Seeds & Traits + Crop Protection

2. Completion of value chain – agricultural
productivity + protection
3. Digital farming beginning to serve as integrator

Post Merger – Value Creation Strategic Fit - Bayer

1. Total synergies post merger of 1.5 billion dollars to be 1. Reinforces Bayer's as Life Sciences company with
reflected after 3 years leadership position in its core business segments
2. In the first year post merger, growth of single expected 2. Broad product portfolio as well as deep combined
in EPS and then in double digits post first year R&D to deliver better solutions for farmers
Company Profiling Deal Rationale Monsanto: Valuation

Relative Valuation

Monsanto

Market Price 127.95

EPS 5.580026

P/E 22.93

Relative Valuation Bayer Offer

Price 65.45371 Price 128

Agricultural Industry

Industry P/E 11.73