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WHEN: Today, Wednesday, September 14th
WHERE: CNBC's "Squawk on the Street"
Following is the unofficial transcript of a FIRST ON CNBC interview with Bayer CEO Werner Baumann and Monsanto CEO Hugh Grant on CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET) today, Wednesday, September 14th. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000551020.
All references must be sourced to CNBC.
DAVID FABER: MONSANTO AGREEING TO BE ACQUIRED BY GERMANY'S BAYER THIS MORNING FOR $128 A SHARE IN AN ALL-CASH TRANSACTION. THE DEAL VALUES MONSANTO AT $66 BILLION. THAT DOES INCLUDE THE COMPANY'S DEBT. WERNER BAUMANN IS THE CEO OF BAYER AND HUGH GRANT IS THE CEO OF MONSANTO. THEY JOIN US IN A FIRST ON CNBC INTERVIEW. THANKS TO YOU BOTH FOR MAKING YOURSELVES AVAILABLE THIS MORNING. MR. BAUMANN, LET ME BEGIN WITH YOU. OF COURSE THE MARKETPLACE HAS KNOWN ABOUT THE POSSIBILITY OF THIS DEAL FOR SOME TIME. AND THAT'S GIVEN YOUR INVESTORS AN OPPORTUNITY TO MAKE THEIR OPINIONS KNOWN. MANY HAVE BEEN SUPPORTIVE OF THE DEAL, PARTICULARLY AS YOU'VE SORT OF TALKED TO YOUR INVESTOR BASE, BUT THERE ARE THOSE WHO SAY THIS IS EMPIRE BUILDING, THIS IS TAKING THE COMPANY IN A COMPLETELY DIFFERENT DIRECTION. WHY IS MONSANTO THE RIGHT TRANSACTION GIVEN ITS SIZE FOR BAYER TO BE DOING AND DOING NOW?
WERNER BAUMANN: WELL, THANK YOU FOR THE QUESTION. AND THE MOST IMPORTANT THING AND THAT IS WHAT WE'VE REALLY BEEN LOOKING AT IS WHAT IT TAKES IN ORDER TO SERVE OUR CUSTOMERS AND TO GROW US BETTER IN THE FUTURE. AND THE GREAT COMBINATION OF MONSANTO AND US IS DOING EXACTLY THAT WHERE WE CAN BRING BETTER SOLUTIONS, FASTER TO THE GROWERS SO THEY CAN HELP CONTRIBUTE TO FEEDING AN EVER GROWING WORLD. THAT'S WHAT THIS IS ALL ABOUT.
FABER: AND YOU BELIEVE THAT IS GOING TO BRING STRONGER GROWTH OBVIOUSLY THEN WOULD THE PREVIOUS STRATEGY OF YOUR PREDECESSOR?
BAUMANN: WELL, THIS IS GOING TO ENABLE BOTH COMPANIES TO COMBINE THEIR INNOVATION EFFORTS EARLY ON IN ORDER TO DEVELOP BETTER INTEGRATED SOLUTIONS FOR THE PHARMAS RATHER THAN DOING THINGS SEQUENTIONALLY. AND THAT'S WHERE THE POWER OF THIS COMBINATION LIES INCLUDING THE SIGNIFICANT COMPETENCIES WE HAVE IN BOTH ORGANIZATIONS. AND THAT IS EXACTLY WHAT IS GOING TO BE NEEDED IN THE MARKET GOING FORWARD. AND THIS IS GOING TO BE A THING THAT IS GOING TO BECOME MORE URGENT AS WE MOVE ALONG INTO THE NEXT PHASE OF FARMING.
FABER: RIGHT. WE'RE LOOKING AT THE STOCK PRICES OF THE TWO COMPANIES AND YOURS IS DOING WELL THIS MORNING. PERHAPS BECAUSE YOU PAID $128. MR. GRANT, THERE ARE THOSE WHO BELIEVED YOU WOULD BE ABLE TO GET MORE FOR MONSANTO, MORE THAN WHAT I THINK IS ABOUT 18.5 TIMES CURRENT YEAR EBITDA, ABOUT 16 TIMES 2017 ESTIMATES. WHY TAKE $128 IN CASH? WHY WAS THAT THE RIGHT PRICE? AND WHY WAS THAT THE RIGHT CONSIDERATION? WHY NOT ALSO HAVE GONE FOR SOME STOCK, PERHAPS, TO GIVE YOUR CURRENT SHAREHOLDERS AN OPPORTUNITY TO BENEFIT FROM SOME OF THE THINGS THAT MR. BAUMANN JUST IDENTIFIED?
HUGH GRANT: THANKS FOR THE QUESTION AND THE INVITATION TODAY. SO WE'RE REALLY PLEASED WITH THE DEAL. IT TOOK A LONG TIME. THE BOARD THOROUGHLY EVALUATED THE WHOLE RANGE OF OPTIONS. AND THIS WAS THE STRONGEST OPTION. IT'S AN ALL-CASH DEAL. IT'S A 44% PREMIUM. IT'S 18.5% MULTIPLE. SO AS WE LOOKED AT THE OPPORTUNITY, IT'S VERY STRONG FOR OUR SHAREHOLDERS. AND AS WE LOOK AT THE FUTURE TO WERNER'S POINT, WE THINK THE COMBINATION OF TAKING THE MONSANTO STABLE BIOTECHNOLOGY SEATS AND DATA SCIENCE AND COMBINING THAT WITH CHEMISTRY WE UNLOCK FUTURE INNOVATION GROWERS DESPERATELY NEED AT THE MOMENT. SO IT'S A GREAT DEAL FOR TODAY. AND I THINK A REAL OPPORTUNITY FOR THE FUTURE.
FABER: AND TO THOSE, MR. GRANT, WHO SAY YOU'RE SELLING REALLY NEAR THE BOTTOM OF A CHALLENGING AG CYCLE. YES, YOU'RE GETTING A MULTIPLE CERTAINLY IN KEEPING WHAT SOME OF THE OTHERS PAID, BUT WE THOUGHT THERE WAS A GREATER OPPORTUNITY YOU HAD HERE AND YOU'RE SELLING TOO CHEAPLY. WHAT DO YOU SAY?
GRANT: YEAH, I DON'T AGREE. I THINK IT'S REALLY HARD TO TIME AG CYCLES. WE'VE BEEN THROUGH 40 YEARS NOW OF DEPRESSED CROP PRICES. TEN-YEAR LOW FOR CORN, FIVE-YEAR LOW FOR WHEAT. WHEN YOU LOOK AT A DEAL LIKE THIS, YOU CAN'T TRY AND TIME THESE THINGS. YOU HAVE TO TAKE THE LONGER VIEW. AND I THINK WHEN YOU LOOK AT THE TECHNOLOGIES AND THE OPPORTUNITY AHEAD, AGRICULTURE NEEDS SOME OF THESE NEW PRODUCTS. SO I THINK THIS IS A STRONG DEAL. I THINK IT'S A GOOD DEAL FOR OUR SHAREHOLDERS. AND I THINK IT'S A MISTAKE TO TRY AND TIME COMMODITY MARKETS. WE'VE SEEN A FOUR-YEAR TROUGH. WHO KNOWS HOW LONG THIS IS GOING TO TAKE TO TURN.
FABER: MR. BAUMANN, CERTAINLY THERE WERE SOME QUESTIONS AS WE MIGHT EXPECT ABOUT THE REGULATORY ENVIRONMENT AND WHAT THIS DEAL WILL FACE BOTH HERE IN THE U.S. AND THE EU. YOU GOT SOME OF THOSE ON YOUR CONFERENCE CALL WITH ANALYSTS EARLIER. AND YOU ACTUALLY SAID YOU'VE GOTTEN AT LEAST AN INITIAL REACHOUT TO SOME REGULATORS. I THINK I HEARD YOU SAY YOU HAD SOME ENCOURAGING FEEDBACK. BUT IT'S EARLY.
FABER: WHAT GIVES YOU THE CONFIDENCE THAT THIS IS GOING TO BE ABLE TO PASS THE MUSTER, BOTH IN THE U.S. AND THE EU, WHEN FARMERS RIGHT NOW ARE LOOKING AT THE OPPORTUNITIES IN FRONT OF THEM AND SEEING DOW AND DuPONT GET TOGETHER, SINGETA GET BOUGHT BY CHEMCHINA, AND NOW YOU TWO BROUGHT TOGETHER?
BAUMANN: SO THIS ACTUALLY SPEAKS TO THE GREAT QUALITY OF THE COMBINATION WE HAVE IN FRONT OF US. AND WE HAVE VERY, VERY LITTLE OVERLAP, THAT IS OF COURSE GOING TO ENABLE A VERY, VERY LET'S SAY CONSTRUCTIVE DISCUSSION WITH REGULATORS ABOUT THEIR CONCERNS ON WHERE WE DO HAVE THESE OVERLAPS. BUT IT'S SUBSTANTIALLY LESS THAN IN SOME OF THE OTHER CASES WHERE THERE ARE SIGNIFICANT PRODUCT OVERLAPS. THIS WHOLE TRANSACTION AND THE WHOLE VISION WE SEE IS DRIVEN BY GROWTH AND INNOVATION AND NOT NECESSARILY HUGE COST CUTTING. THIS COMBINATION IS GOING TO BE DRIVEN BY HIGHLY COMPLIMENTARY PRODUCT PORTFOLIOS. AND BASED ON THE ANALYSIS WE HAVE DONE, EACH OF OUR COMPANIES ON OUR OW, WITH OUR ANTITRUST COUNCIL AND ADVISORS, WE TOGETHER DURING THE CONTRACT NEGOTIATIONS WHERE YOU CAN CERTAINLY SEE THAT A LOT OF THE ACTIVITY SURROUNDING ANTITRUST IS ALL ABOUT THE ASCERTAINTY. WE DEVELOPED A JOINT LEVEL OF COMFORT THAT THE ANTITRUST DISPOSALS THAT MIGHT BE REQUIRED CAN BE MANAGED WITH A COMBINATION OF OUR TWO BUSINESSES.
FABER: HAVE YOU MADE –
BAUMANN: THAT'S WHAT I MEANT.
FABER: HAVE YOU MADE COMMITMENTS TO DIVESTITURES IN THE MERGER AGREEMENTS THAT YOU WILL UNDERTAKE IN ORDER TO RECEIVE ANTITRUST APPROVAL OR IS IT SIMPLY YOUR BEST EFFORTS?
BAUMANN: NO. WE HAVE MADE SOME SPECIFIC PROVISIONS THAT WE INCLUDED IN THE MERGER AGREEMENT TO ALSO PROVIDE THE MONSANTO BOARD WITH THE NECESSARY LEVEL OF COMFORT. WE FEEL COMFORTABLE WITH IT. YOU AND HIS TEAM FEEL COMFORTABLE WITH IT.
BAUMANN: SO WE BELIEVE THAT WE HAVE A BASE THAT IS STIPULATED IN THE CONTRACT THAT WE CAN JOINTLY WORK AGAINST.
GRANT: I WOULD JUST ADD, I THINK WHAT MAKES THIS UNIQUE IS A CLEAR VIEW OF A PATHWAY TO CLOSING THIS DEAL BECAUSE THE TWO BUSINESSES ARE SO UNIQUELY SEPARATE BETWEEN CHEMISTRY, SEEDS TRAITS AND DATA SCIENCE. THAT'S THE OPPORTUNITY ON CLOSING THIS IN A 12, 15-MONTH PERIOD.
FABER: YEAH. MR. GRANT, THOUGH, I'VE HAD ANY NUMBER OF CEOS THAT I'VE INTERVIEWED FOR DEALS WHO ALSO BELIEVE STRONGLY THEY WERE FINE ON THE ANTITRUST FRONT. BUT IT'S BEEN A TOUGH ENVIRONMENT BOTH HERE IN THE U.S. AND IN THE EU. SOME UNEXPECTED THINGS HAVE OCCURRED. DO YOU FEEL LIKE YOU'RE BEING COMPENSATED ENOUGH? SHOULD YOU NOT GET WHAT YOU WANT ON THE ANTITRUST FRONT? THE 2 BILLION REVERSE BREAK FEE, HAVING A COMPANY THAT GOES THROUGH THIS AND COMES OUT THE OTHER SIDE AS INDEPENDENT IS NOT THE EASIEST THING. ARE YOU CONFIDENT MONSANTO WILL BE WELL POSITIONED IF IT DOESN'T GO YOUR WAY?
GRANT: WE ARE, BUT WE'RE FOCUSED – MY PERSONAL COMMITMENT TO THIS, THE COMMITMENT OF MY TEAM, IS TO DO TWO THINGS. NUMBER ONE, DURING THE 12 TO 15 MONTHS, WE'LL SEE TWO SPRINGS AND ONE HARVEST. SO WE'RE GOING TO FOCUS ON SERVING OUR GROWER CUSTOMERS AROUND THE WORLD. NUMBER TWO, WE'RE GOING TO GET THIS DEAL CLOSED. AND I FEEL CONFIDENT WHEN THE ANALYSIS THAT WE'VE DONE, WITH THE WHAT WE'VE DONE WITH ADVISORS AND SOME OF OUR PREVIOUS ANALYSIS AS WELL, THAT THIS IS A CLEAN DEAL.
FABER: YEAH. AND, MR. BAUMANN, IF I'M A FARMER, WHAT DO YOU TELL ME TO MAKE ME FEEL BETTER ABOUT YOU TWO GETTING TOGETHER?
BAUMANN: WELL, IF YOU'RE A FARMER, I WOULD TELL YOU THAT THIS COMBINATION IS GOING TO PROVIDE BETTER SOLUTIONS FOR YOU TO PICK AND CHOOSE FROM. OR TO GO FOR AN ENHANCED OFFERING THAT WE BRING TO THE TABLE WITH A UNIQUE COMBINATION OF BIOLOGICALS, SEEDS, CROP PROTECTION AND ANALYTICS THAT WILL ULTIMATELY ENABLE YOU AS A FARMER TO TAKE BETTER DECISIONS AND TO DRIVE HIGHER YIELDS AND WITH THAT A BETTER FARM INCOME FOR YOU AND YOUR FAMILY.
GRANT: I WOULD JUST ADD –
FABER: YES, MR. GRANT, GO AHEAD.
GRANT: I WOULD JUST ADD ONE THING. THE NAME OF THE GAME IN FARMING AROUND THE WORLD WHETHER YOU'RE A BIG FAMRER OR SMALL ONE IS DRIVING EFFICIENCY. AND THAT BECOMES REALLY, REALLY IMPORTANT IN TOUGH TIMES. FARMERS ARE STARVING FOR INNOVATION.
GRANT: AND THIS, THROUGH TIME, WILL BRING BETTER INNOVATION TO THEM.
FABER: AND MR. BAUMANN, FINALLY. 1.5 BILLION IN SYNERGIES TO EBITDA. YOU'RE CONFIDENT YOU CAN ACHIEVE THAT AFTER THREE YEARS. WHY?
BAUMANN: WE HAVE A TRACK RECORD OF SUSTAINABILITY AND ACTUALLY WITH ALL THE TRANSACTIONS WE'VE DONE IN THE PAST, DELIVERING AGAINST THE COST SYNERGY TARGETS WE HAVE SET OURSELVES, $1.5 BILLION IS A TALL ORDER TO SOLVE FOR, BUT WE ARE ABSOLUTELY CONFIDENT WE ARE GOING TO REACH THIS. AND WE HAVE ALREADY STARTED SOME PRE-INTEGRATION PLANNING. WE WILL FOR SURE BE WORKING VERY, VERY DETAILEDLY ON IT AND THEN WE WILL ALSO DELIVER, REST ASSURED.
FABER: WELL, GENTLEMEN, WE CERTAINLY APPRECIATE YOU'RE TAKING THE TIME WITH US THIS MORNING. WERNER BAUMANN IS THE CEO OF BAYER. HUGH GRANT, THE CEO OF MONSANTO.
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