Bayer to Sell Select Business Lines to Close Monsanto Buyout
Bayer Aktiengesellschaft BAYRY has inked a deal to sell selected Crop Science businesses to BASF for EUR 5.9 billion. Notably, the company intends to divest these assets as a part of its strategy to complete the planned acquisition of Monsanto Co. MON.
The divestiture is subject to the closure of Monsanto deal and Bayer is working with the relevant authorities to end the acquisition by early next year. In fact, the company plans to utilize the net proceeds from the divestiture for partially refinancing the planned acquisition of Monsanto.
Markedly, the assets to be divested include Bayer’s global glufosinate-ammonium non-selective herbicide business and the related LibertyLink technology for herbicide toleranceas well as its seed businesses for key row crops in select markets. The transaction includes respective research and development capabilities as well. In 2016, revenue from these businesses amounted to around €1.3 billion.
So far this year, Bayer’s shares have outperformed the industry. The stock has rallied 34.1% compared with the industry’s gain of 18.3%.
More than 1,800 commercial, R&D, breeding and production personnel will be transferred from Bayer to BASF.
Meanwhile, Bayer will continue to own, operate and maintain these businesses until the closing of this divestiture.
In Sep 2016, Bayer signed a definitive merger agreement to acquire U.S. seed giant Monsanto Company in a deal worth approximately $66 billion. The combined business is expected to boost Bayer’s Crop Science business and provide accretion to its core earnings from the first full year of the closing of the transaction, followed by double-digit percentage growth.
Bayer also expects annual earnings contributions of around $1.5 billion from synergies after three years of closing the transaction, as well as additional future benefits from integrated offerings. We believe that the proposed Monsanto acquisition is a strategic move which will offer Bayer with a broad set of solutions to meet farmers’ current and future needs.
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Zacks Rank & Stocks to Consider
Bayer carries a Zacks Rank #3 (Hold). Some better-ranked stocks in health care sector include Adaptimmune Therapeutics plc ADAP and Celgene Corporation CELG holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Adaptimmune’s loss per share estimates have narrowed from $1.07 to 95 cents for 2017 and from $1 to 90 cents for 2018 over the last 60 days. The company delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 2.56%. The share price of the company has increased 88.6% year to date.
Celgene’s earnings per share estimates have moved up $9 to $9.02 for 2018. The company pulled off positive earnings surprises in all the trailing four quarters, with an average beat of 3.80%. The share price of the company has increased 17.9% year to date.
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