Bayer Details Financing Plan for Monsanto Deal
23 February 2017 - 6:02AM
Dow Jones News
By Nina Trentmann
Bayer AG Chief Financial Officer Johannes Dietsch said Wednesday
the company will stick to its plan to raise $19 billion in equity
before moving on to a rights and bond issue, providing more detail
on the financing for the German pharmaceutical giant's takeover of
U.S. seed maker Monsanto Co.
"We want to do the equity first before we enter the bond
markets," Mr. Dietsch said during a call with analysts. Should the
company decide to go for a large or "very large" rights issue,
Bayer would wait until there was more visibility on the regulatory
outlook for the deal, he said.
Bayer said it was confident that the planned $57 billion
acquisition of Monsanto would pass regulatory hurdles by the end of
the year, despite delays with U.S. and European antitrust
authorities.
The purchase price for Monsanto needs to be paid in dollars, Mr.
Dietsch said. The company plans to issue corporate bonds in dollars
and will also consider other currencies.
There is a certain level of currency risk around the equity part
of the financing, even though the company has a number of currency
hedges in place. Bayer is raising equity in Europe and is
"relatively exposed" should the euro weaken further against the
dollar, Mr. Dietsch said. The euro traded at $1.055 against the
dollar on Wednesday, according to FactSet data.
Bayer previously issued EUR4 billion ($4.21 billion) of
mandatory convertible bonds as part of the financing for the
Monsanto deal.
The CFO's comments came as Bayer reported a 26% decline in net
profit from a year earlier due to one-time expenses, such as the
costs for the bridge loan for the Monsanto transaction.
Net profit fell to EUR453 million in the three months to
end-December from EUR613 million in the same period a year
earlier.
In addition, changes to the U.S. tax code as proposed by House
Republicans could be beneficial for the company, Mr. Dietsch
said.
"We are moderately optimistic that the tax reform, especially
lowering the official tax rate down to 20%, will be ultimately
beneficial for Bayer," he said. The U.S. corporate tax rate is
currently 35%.
However, potential changes to the deductibility of interest rate
expenses might have a negative impact on Bayer's tax situation in
the U.S., he said, adding that it was too early to comment on
possible changes to Bayer's U.S. investments.
Write to Nina Trentmann at Nina.Trentmann@wsj.com
(END) Dow Jones Newswires
February 22, 2017 13:47 ET (18:47 GMT)
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