Bayer’s $56.9 Billion Acquisition Facilities Oversubscribed 40%



The financing

In the first part of this series, we saw how Bayer and Monsanto (MON) have performed in the month after their merger announcement. The deal is valued at $57 billion, or $128 per share of Monsanto. Bayer will finance the deal with a combination of equity and debt.

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Bayer’s credit ratings

When we look at debt, it’s important to know the company’s credit rating. As you can see in the above table, Bayer has an investment-grade credit rating on short-term, long-term, and senior unsecured debt from Moody’s, Fitch, and Standard & Poor’s.

40% oversubscription

On October 12, 2016, Bayer announced that the acquisition facilities of $56.9 billion were successfully syndicated with Bayer’s group of core relationship banks. According to the company, more than 20 banks joined this syndicated group, which led to a 40% oversubscription. With an investment-grade rating, raising the financing seemed to be an easy task for Bayer. The company is inching closer to Monsanto. The next steps for Bayer and Monsanto are to get approvals from shareholders and antitrust authorities.

The increase in leverage related to Monsanto’s acquisition brings more risk to equity investors. However, Bayer addressed this by stating that it “has a proven track record of disciplined deleveraging after large acquisitions and believes that the strong cash flows of the combined business will contribute to improving its financial profile. Bayer targets an investment grade credit rating post-closing and is committed to the single “A” credit rating category over the long-term.”

In the next part, we’ll take a look at market sentiment for the stock. We’ll also look at market sentiment for PotashCorp (POT), Agrium (AGU), Dow Chemical (DOW), and E I du Pont de Nemours (DD).


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