Bayer’s Dermatology Unit Sale Said to Attract Teva and Perrigo
September 22, 2016
By Mark Terry, BioSpace.com Breaking News Staff
In an apparent effort to raise cash to acquire St. Louis, Missouri-based Monsanto Co. , Germany’s Bayer AG is considering selling off its dermatology unit.
On May 23, Bayer made an official bid for Monsanto with an all-cash offer for all issued and outstanding Monsanto common stock for $122, which has a total value of about $62 million (US). On May 24, Monsanto rejected the bid, although it indicated it was open to further discussions.
The deal finally was announced on September 14 in a deal valued at $66 billion. Bayer will pay $128 per share in cash.
Around June 20, Bayer was attempting to sell off its radiology supplies unit for about $3 billion in an attempt to raise funds to sweeten the Monsanto offer. The deal has raised some eyebrows, because the price values Monsanto at nearly 21 times earnings before interest, taxes, depreciation and amortization. Comparable deals, according to Bloomberg, have a median of about 9.4 times.
Of the dermatology unit, inside sources are saying that Israel-based Teva Pharmaceutical Industries , Allergan , Michigan-based Perrigo CO. and Mumbai, India-based Sun Pharmaceutical Industries are considering the buy. A variety of private equity “buyout firms” are also in the running, including KKR & Co., Nordic Capital, Bain Capital, Blackstone Group and Cinven.
JPMorgan Chase & Co. is apparently working with Bayer on the sale.
There is some skepticism by analysts on whether the Bayer-Monsanto deal will survive anti-trust evaluations. Tyler Cowen, writing for BloombergView this week, said, “It appears that some of the opposition to the deal can be traced to a dislike of the companies involved, especially Monsanto. If that becomes a consideration for U.S. and European Union regulators, it will amount to a worrisome politicization of antitrust policy. Keep in mind that the proposed acquisition needs approval in about 30 different political jurisdictions, hardly a recipe for flexible adjustment to changing marketplace conditions. The shares of Monsanto have been trading well below the offer price, a sign that investors don’t expect the proposal to survive.”
And it certainly is taking on an odd public relations aspect. It is reported that top French chefs have declared the acquisition a “danger for our dinner plates. Without a healthy and quality product, without diversity, a chef can’t express his creative talent.” The statement was signed by over 100 chefs.
The Monsanto brand name, largely due to its involvement in genetically modified organisms (GMO) in its crops, is so toxic that Bayer is considering dropping the Monsanto name if the deal actually comes together.
One argument against the merger is that the combined companies will drive up prices for farmers, as well as increase the use of genetically-modified seeds. The two companies argue that the merger will improve the opportunities to research new products that will help farmers grow more food.
Assuming the deal doesn’t get nixed by somebody, it will probably close sometime in 2017. First up, the U.S. Senate Judiciary Committee will take a look at it on Tuesday, September 27.