Bayer CEO Defends Planned Acquisition of Monsanto -- 2nd Update
26 Oktober 2016 - 12:18PM
Dow Jones News
By Christopher Alessi
FRANKFURT-- Bayer AG Chief Executive Werner Baumann Wednesday
defended the company's planned $57 billion acquisition of U.S.
agrochemical group Monsanto Co. amid concerns the deal could face
an uphill battle with regulatory authorities over antitrust
issues.
"This step is entirely logical," Mr. Baumann said of the merger
with Monsanto. "The two companies are a perfect fit and complement
each other ideally."
The deal with Monsanto, valued at $66 billion including debt, is
the latest in a wave of consolidation in the $100 billion global
crop seeds and pesticides market over the past year. Tie-ups
between Syngenta AG and China National Chemical Corp. and between
Dow Chemical Co. and DuPont Co. have been held up by ongoing
antitrust reviews by the European Union.
Mr. Baumann said the German pharmaceuticals and chemicals giant
would submit its application to EU regulatory authorities in the
first quarter of 2017 and to U.S. authorities by the end of this
year. He reiterated that he expected the deal to close by the end
of 2017.
Mr. Baumann's remarks came as the company announced its earnings
results for the third quarter of 2016. Bayer posted a 19% rise in
net profit and raised its full year earnings guidance, boosted by
continued uptake of its recently launched blockbuster drugs.
Net profit for the period ended Sept. 30 was EUR1.19 billion
($1.3 billion), compared with EUR999 million for the same period
last year. The figure beat analysts' forecasts of a EUR1.1 billion
profit, according to a recent poll by The Wall Street Journal.
Bayer said it now expects to achieve a high-single-digit
percentage increase in core earnings a share for 2016, up from its
previous forecast of a mid-to-high-single-digit percentage
improvement. The company also reiterated its sales outlook for the
full year, saying it expects sales of between EUR46 billion and
EUR47 billion.
Analysts at Commerzbank called Bayer's profitability
"excellent," while saying the company had delivered an overall
"positive" set of third quarter figures.
Quarterly sales rose 2.3% to EUR11.26 billion, driven by sales
of blockbuster drugs like blood thinner Xarelto and eye medicine
Eylea.
The company's closely watched measure of earnings before
interest, taxes, depreciation and amortization before special items
climbed by 6%, to EUR2.68 billion, driven by strong earnings growth
at its pharmaceuticals unit. Ebitda before special items for
pharmaceuticals jumped 13.4% to EUR1.42 billion.
The group's recently separated specialty plastics business,
Covestro AG, also posted strong earnings growth, with Ebitda before
special items rising 19.5% to EUR564 million. Bayer spun off
Covestro last year through a public offering but still maintains a
roughly 64% stake in the company.
However, growth at Bayer's increasingly core crop science
division was held back by persistent weaknesses in the global
agricultural market. Ebitda before special items at the unit rose
just 0.6% to EUR318 million.
The crop division has taken center stage since the company
agreed last month to acquire Monsanto. The deal would significantly
reshape Bayer's portfolio. Crop science sales would comprise
roughly half of overall revenue, compared with 30% in 2015, while
the health care business would constitute the other half.
Analysts have widely said the two companies are complementary.
Bayer has a strong footprint in crop protection chemicals, while
Monsanto is a leader in biotechnology and seeds.
The merged company would be the largest supplier by sales of
both seeds and pesticides.
Write to Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
October 26, 2016 06:03 ET (10:03 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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