Monsanto’s (MON) merger with Bayer AG is expected to be completed by 2H18. However, the merger depends on regulators’ approval. The combined company can’t disrupt markets where both companies are present.
The merger was set at a price of $128 per share of Monsanto. If the merger fails, Bayer will pay a reverse breakup fee of $2 billion to Monsanto.
Initial regulatory approvals
In the above chart, you can see that Monsanto received initial regulatory approvals from South Africa as well as other jurisdictions, which is positive for investors wanting the deal to close. After closure, Monsanto shares might rise to $128. Currently, it’s trading at $118.5 or a 7% discount to the acquisition price.
Investors seem unsure about the deal passing all of the regulatory approvals, which might explain why Monsanto shares are trading at a discount. The regulatory authorities include the European Commission, the U.S. Department of Justice, and authorities in other markets that would likely be impacted.
Antitrust regulators make sure that the market (XLB) isn’t disadvantaged by mergers. Companies can’t take advantage of their concentrated position in the market to influence prices or other market dynamics.