Deals and IPOs

Germany's Bayer reveals $62B all-cash offer for US agri-chem giant Monsanto

Christine Seib and Jessica Hartogs
Haven't heard from Monsanto yet: Bayer CEO
Haven't heard from Monsanto yet: Bayer CEO
Monsanto deal stands on its own merits: Bayer CEO
Monsanto deal stands on its own merits: Bayer CEO
Bayer offers $122 per share for Monsanto
Bayer offers $122 per share for Monsanto

Bayer announced Monday it has offered $122 per share for Monsanto in an all-cash deal that values the U.S. agri-chemicals company at $62 billion.

Word of the deal help boost Monsanto's share price by more than 8 percent at $109.97 a share in premarket U.S. trading Monday. (Click here for the latest price.)

Asked on Monday why shares were not trading closer to the offer price, Bayer CEO Werner Baumann said Wall Street needed time to educate itself on the deal.

Baumann told CNBC's "Squawk Box" he did not see any major regulatory or other risks to the transaction, and noted it would be fully funded.

"The beauty of this combination is that both businesses are highly complementary, and it's very much a growth story that is behind the combination. The product portfolios complement each other perfectly. The regional fit is really great," he said.

Bayer makes unsolicited bid for Monsanto, as commodity woes spur agrichem tie-ups

Bayer said the bid was at a 37 percent premium to Monsanto's May 9 closing share price of $89.03. Talks between the German drugs company and Monsanto were revealed on May 19.

Baumann said Bayer decided to speak publicly about the previously private discussions to explain why it believes the deal is attractive.

Bayer said it expected the deal to provide its shareholders with mid-single-digit percentage accretion to core earnings per share in the first full year after the deal closed. This would increase to a double-digit percentage afterward, the company said.

Bayer said it expected annual earnings contributions from synergies to be worth about $1.5 billion three years after the deal closed.

The German company said it would finance the deal with a combination of debt and equity, with the equity portion to represent about 25 per cent of the deal's value. The cash would be raised mainly via rights offering, Bayer said. Bank of America Merrill Lynch and Credit Suisse were financing the deal, it added.

"What we are seeing is that the corporates in the U.S. have been leveraging steadily over the last two or three years ... the rest of the world is only catching up to the U.S. in terms of beginning to leverage their balance sheets so I would expect a lot more M&A activity outside of the U.S.," Ashok Shah, director of asset management company London & Capital, told CNBC on Monday.

"Most sectors got through these kinds of phases when you have a lot of reorganization within the sector and that is a lot to do with the maturity of the product profile of the stuff that's being sold to the customer," added Shah.

Meanwhile, Julien Jarmoszko, senior research manager at S&P Global Market Intelligence, told CNBC that he could see the new group generating around $7 billion of free cash flow annually per dividends.

"That will be compared against around $40 billion of debt which means they can pay down the debt in seven years really," he said.

CNBC's Tom DiChristopher contributed to this story.