Bayer Clinches Monsanto With Improved $66-Billion Bid

German drugs and crop chemicals company Bayer has won over US seeds firm Monsanto with an improved takeover offer of around $66 billion, ending months of wrangling after increasing its bid for a third time. The $128 a share deal, up from Bayer’s previous offer of $127.50 a share, is the biggest of the year so far and the largest cash bid on record. The deal will create a company commanding more than a quarter of the combined world market for seeds and pesticides in the fast-consolidating farm supplies industry.

However, competition authorities are likely to scrutinize the tie-up closely, and some of Bayer’s own shareholders have been highly critical of a takeover plan, which they say risks overpaying and neglecting the company’s pharmaceutical business. The transaction includes a break-fee of $2 billion that Bayer will pay to Monsanto should it fail to get regulatory clearance. Bayer expects the deal to close by the end of 2017.

The details confirm what a source close to the matter told Reuters earlier.

Bernstein Research analysts said on Tuesday they saw only a 50% chance of the deal winning regulatory clearance, although they cited a survey among investors that put the likelihood at 70% on average.

“We believe political pushback to this deal, ranging from farmer dissatisfaction with all their suppliers consolidating in the face of low farm net incomes to dissatisfaction with Monsanto leaving the US, could provide significant delays and complications,” they wrote in a research note.

Bayer said it was offering a 44% premium to Monsanto’s share price on May 9, the day before it made its first written proposal. It plans to raise $19 billion to help fund the deal by issuing convertible bonds and new shares to its existing shareholders, and said banks had also committed to providing $57 billion of bridge financing. At 11:40 GMT, Bayer shares were up 2.2% at 95.32 euros. Monsanto’s were up 0.2% at $106.3 in premarket trade.

Bayer’s move to combine its crop chemicals business, the world’s second largest after Syngenta AG, with Monsanto’s industry-leading seeds business, is the latest in a series of major tie-ups in the agrochemicals sector. The German company is aiming to create a one-stop shop for seeds, crop chemicals, and computer-aided services to farmers.

That was also the idea behind Monsanto’s swoop on Syngenta last year, which the Swiss company fended off, only to agree later to a takeover by China’s state-owned ChemChina.

Elsewhere in the industry, U.S. chemicals giants Dow Chemical and DuPont plan to merge and later spin off their respective seeds and crop chemicals operations into a major agribusiness.

The Bayer-Monsanto deal will be the largest ever involving a German buyer, beating Daimler’s tie-up with Chrysler in 1998, which valued the US carmaker at more than $40 billion. It will also be the largest all-cash transaction on record, ahead of brewer InBev’s $60.4 billion offer for Anheuser-Busch in 2008.

Bayer said it expected the deal to boost its core earnings per share in the first full year following completion, and by a double-digit percentage in the third year. Bayer and Monsanto were in talks to sound out ways to combine their businesses as early as March, which culminated in Bayer coming out with an initial $122 per-share takeover proposal in May.

Antitrust experts have said regulators will likely demand the sale of some soybeans, cotton and canola seed assets as a condition for approving the deal. Bayer said BofA Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC and JP Morgan had committed to providing the bridge financing. BofA Merrill Lynch and Credit Suisse are acting as lead financial advisers to Bayer, with Rothschild as an additional adviser. Bayer’s legal advisers are Sullivan & Cromwell LLP and Allen & Overy LLP. Morgan Stanley and Ducera Partners are acting as financial advisers to Monsanto, with Wachtell, Lipton, Rosen & Katz its legal adviser.