 "Bayer to choose banks for Monsanto offer")
Bayer is close to choosing banks to arrange funds for its proposed acquisition of Monsanto, according to people familiar with the matter, after the U.S. company rejected the initial $62 billion bid as too low and sought reassurances on the potential financing.
Bayer will probably raise more than $40 billion in short-term bridge financing and most of the remainder in term loans, said the people, who asked not to be identified because the talks are private. The German company interviewed lenders at its headquarters in Leverkusen this week and is likely to select about half a dozen banks next week, the people said.
Funding negotiations are ongoing and the amounts could change, the people said. Banks are likely to offer additional financing to give Bayer room to increase its offer if needed, said the people. A spokesman for Bayer declined to comment.
Providing the terms of the funding may allay Monsanto's concerns about the financing and let talks advance on Bayer's bid to become the world's biggest supplier of farm chemicals. On Tuesday, Monsanto said that while the original offer was inadequate, it's open to further negotiations. Bayer remains confident about reaching an agreement on the deal, which would be the largest this year and biggest ever by a German company.
Bayer is considering selling convertible debt for $2 billion to $3 billion, two of the people said. Banks are offering $40 billion to $50 billion in bridge loans, the people said. These are short-term funds provided by lenders in an acquisition while the buyer arranges longer-term funding such as term loans and bonds. The term loans could total more than $20 billion, one of the people said.
Bank of America and Credit Suisse Group are Bayer's main advisers and financiers. Rothschild is also advising Bayer.
Shares of Bayer closed 0.4 per cent lower at ^85.33 in Frankfurt on Friday. The stock has dropped 15 per cent since May 11, the day before Bloomberg News reported that Bayer was exploring a possible bid. Monsanto, which has climbed 21 per cent in the same period, closed 0.1 per cent lower at $109.49 in New York on Friday.
In unveiling its May 10 offer of $122 a share in cash, Bayer said the transaction would be funded with a combination of debt and equity, with about a quarter of the $62 billion in enterprise value coming from selling shares to existing investors. Bayer may also sell new hybrid bonds "to a very limited extent," while relying largely on senior debt, Chief Financial Officer Johannes M Dietsch told analysts on Monday.
Bayer will probably make a higher bid, Jonas Oxgaard, an analyst with Sanford C Bernstein & Co in New York, said Tuesday in a note, adding that an offer below $135 per share would be "challenging" for Monsanto to agree to. The offered price is unlikely to go beyond $140 a share, according to Jeffrey Holford, an analyst at Jefferies.
