Bayer Shows Strong Performance — Acquisition of Monsanto Agreed

"The announcement that we had reached agreement to acquire Monsanto is a major strategic milestone for Bayer," said Bayer Management Board Chairman Werner Baumann.

The Bayer Group (one of DiversityInc's 25 Noteworthy Companies) remained on a path of growth in the third quarter of 2016 and took a major strategic step forward with the agreed acquisition of Monsanto (No. 43 on the DiversityInc Top 50 Companies list).


"The announcement that we had reached agreement to acquire Monsanto is a major strategic milestone for Bayer. We will be creating a global leader in agriculture and, at the same time, reinforcing our leadership position as a Life Science company," said Bayer Management Board Chairman Werner Baumann when he presented the interim report for the third quarter last week.

The third quarter was very successful in operational terms as well, reported Baumann. In the Life Science businesses, Bayer achieved encouraging sales and earnings growth overall. Pharmaceuticals especially registered a very positive business performance once again. The recently launched products showed continued strong development. Consumer Health increased sales on a currency- and portfolio-adjusted basis (Fx & portfolio adj.) but EBITDA before special items was below the prior-year level. The operating performance of Crop Science held steady year on year in a persistently difficult business environment. Animal Health raised sales and earnings. Covestro registered slight growth in sales (Fx & portfolio adj.) and a substantial increase in EBITDA before special items. The outlook for the full year remains positive. Bayer is raising the forecast for core earnings per share.

Sales of the Bayer Group increased by 2.3 percent (Fx & portfolio adj. 3.5 percent) in the third quarter to EUR 11,262 million (Q3 2015: EUR 11,004 million). EBITDA before special items improved by 6.0 percent to EUR 2,682 million (Q3 2015: EUR 2,530 million).

EBIT advanced by 14.2 percent to EUR 1,795 million (Q3 2015: EUR 1,572 million) after special charges of EUR 125 million (Q3 2015: EUR 204 million). These mainly comprised EUR 52 million in connection with the agreed acquisition of Monsanto, EUR 49 million for efficiency improvement measures and EUR 23 million for the integration of acquired businesses. EBIT before special items moved forward by 8.1 percent to EUR 1,920 million (Q3 2015: EUR 1,776 million). Net income increased by 18.8 percent to EUR 1,187 million (Q3 2015: EUR 999 million), and core earnings per share from continuing operations by 2.4 percent to EUR 1.73 (Q3 2015: EUR 1.69).

Gross cash flow from continuing operations climbed by a robust 36.1 percent to EUR 1,951 million (Q3 2015: EUR 1,434 million), due among other things to the increase in EBIT. Owing to a decrease in cash tied up in working capital, net cash flow (total) rose by a substantial 31.0 percent to EUR 3,053 million (Q3 2015: EUR 2,330 million). Net financial debt declined by EUR 2.0 billion, from EUR 17.8 billion on June 30, 2016, to EUR 15.8 billion on September 30, 2016, due mainly to cash inflows from operating activities.

Strong sales and earnings growth at Pharmaceuticals

Sales of prescription medicines (Pharmaceuticals) rose by an encouraging 7.3 percent (Fx & portfolio adj. 7.6 percent) to EUR 4,152 million (Q3 2015: EUR 3,870 million). "Our recently launched products showed continued strong development," said Baumann. The oral anticoagulant Xarelto™, the eye medicine Eylea™, the cancer drugs Xofigo™ and Stivarga™, and the pulmonary hypertension treatment Adempas™ posted total combined sales of EUR 1,395 million (Q3 2015: EUR 1,082 million).

After adjusting for currency effects, the increase was 28.3 percent. Xarelto™ again posted strong sales growth (Fx adj. plus 34.4 percent), due mainly to volume increases in Europe and Japan. It also registered encouraging gains in the United States, where it is marketed by a subsidiary of Johnson & Johnson. Sales of Eylea™ increased considerably (Fx adj. plus 26.5 percent), due particularly to good business performance in Europe and Canada.

Among the established top Pharmaceuticals products, especially the hormone-releasing intrauterine devices of the Mirena™ product family posted strong sales gains (Fx adj. plus 13.2 percent), due particularly to positive price development in the United States. Continuing to benefit from high demand in China, business with the oral diabetes treatment Glucobay™ (Fx adj. plus 8.0 percent) and the antibiotic Avalox™/Avelox™ (Fx adj. plus 8.8 percent) registered encouraging growth.

Fluctuations in the order volumes placed by Bayer's distribution partner resulted in slightly lower sales (Fx adj. minus 2.4 percent) of the blood-clotting medicines Kogenate™/Kovaltry™. Business with the cancer drug Nexavar™ was noticeably down against the prior-year level (Fx adj. minus 9.3 percent), particularly as a result of increased competitive pressure in the United States. Sales of the multiple sclerosis product Betaferon™/Betaseron™ receded significantly (Fx adj. minus 19.7 percent), mainly because of a weaker business performance in the United States and Europe. Overall, the Pharmaceuticals business expanded in all regions on a currency-adjusted basis.

EBITDA before special items of Pharmaceuticals increased by a substantial 13.4 percent to EUR 1,421 million (Q3 2015: EUR 1,253 million), although investment in research and development remained disproportionately high. One factor in this earnings growth was the very good development of business, particularly for the recently launched products. Another factor was Bayer's success in keeping selling expenses at around the same level year on year.

Moderate expansion of business at Consumer Health

Sales of self-care products (Consumer Health) were level year on year at EUR 1,425 million (Q3 2015: EUR 1,424 million). After adjusting for currency and portfolio effects, the increase was 3.6 percent. On a currency-adjusted basis, business developed positively in the Latin America/Africa/Middle East, North America and Asia/Pacific regions. In Europe, however, sales declined slightly compared with a strong prior-year quarter. "We achieved double-digit growth with our Aleve™, Alka-Seltzer™, One A Day™ and Elevit™ brands," said Baumann.

The analgesic Aleve™ registered a currency-adjusted increase of 12.7 percent driven by positive business development in the United States, due in part to a product line extension. The Alka-Seltzer™ family of products to treat gastric complaints and cold symptoms (Fx adj. plus 15.0 percent) and the One A Day™ vitamin product (Fx adj. plus 11.8 percent) also achieved substantial sales gains that were mainly attributable to product line extensions in the United States. Business with the Elevit™ vitamin product grew significantly (Fx adj. plus 17.9 percent), especially in China. By contrast, business with the sunscreen product Coppertone™ was down (Fx. adj. minus 5.0 percent) against the prior-year quarter due to lower sales in the United States.

EBITDA before special items of Consumer Health declined by 3.5 percent to EUR 328 million (Q3 2015: EUR 340 million). The earnings contributions from the positive business development were not sufficient to offset the higher cost of goods sold and negative currency effects of approximately EUR 20 million.

Crop Science successful in a persistently difficult market environment

Sales of the agricultural business (Crop Science) came in at EUR 2,057 million (Q3 2015: EUR 2,081 million). This amounted to a decline of 1.2 percent on a reported basis. Adjusted for currency and portfolio effects, sales were level year on year. "Crop Science was successful in a persistently difficult market environment," said Baumann. Business at Crop Protection/Seeds was steady overall at the prior-year level despite an ongoing weak business environment, particularly in Latin America. Crop Science sales developed encouragingly in Europe (Fx adj. plus 5.8 percent) and North America (Fx adj. plus 5.7 percent). Sales edged forward year on year (Fx adj. plus 1.1 percent) in the Asia/Pacific region but declined (Fx adj. minus 5.3 percent) in the Latin America/Africa/Middle East region.

At Crop Protection, Fungicides posted an increase of 8.1 percent (Fx. & portfolio adj.), whereas Insecticides saw a considerable decrease (Fx & portfolio adj. minus 16.8 percent). Performance at Herbicides (Fx & portfolio adj. minus 1.0 percent) and Seed-Growth (Fx & portfolio adj. minus 3.7 percent) declined year on year. Development at Seeds was very encouraging, with sales expanding by 21.6 percent (Fx & portfolio adj.). Environmental Science also expanded sales by a robust 17.7 percent (Fx & portfolio adj.).

EBITDA before special items of Crop Science increased by 0.6 percent to EUR 318 million (Q3 2015: EUR 316 million). Higher selling prices and a positive currency effect of around EUR 80 million stood against lower volumes, higher write-downs on receivables and higher research and development expenses, among other things.

Animal Health raises sales and earnings

Bayer grew sales of the Animal Health business by 0.8 percent (Fx & portfolio adj. 2.5 percent) to EUR 360 million (Q3 2015: EUR 357 million). The Asia/Pacific region developed especially positively. Sales also increased in Europe, while business in North America declined slightly. Business with the Seresto™ flea and tick collar developed positively in all regions, expanding by 19.2 percent (Fx adj.). Sales of the Advantage™ family of flea, tick and worm control products were level with the prior-year quarter. EBITDA before special items of Animal Health increased by 6.0 percent to EUR 89 million (Q3 2015: EUR 84 million), due especially to volume and price increases and to lower selling expenses. These stood against an increase in the cost of goods sold and in research and development expenses.

Substantial earnings growth at Covestro

Third-quarter sales of Covestro amounted to EUR 3,004 million (Q3 2015: EUR 3,009 million). Business was level year on year on a reported basis (minus 0.2 percent) and edged forward by 1.0 percent after adjusting for currency and portfolio effects. Volumes were up year on year overall, particularly at Polycarbonates and Polyurethanes. Selling prices declined in all business units. EBITDA before special items improved by 19.5 percent to EUR 564 million (Q3 2015: EUR 472 million). This increase resulted mostly from lower raw material prices and higher volumes that more than offset the decline in selling prices. Earnings were diminished by a negative currency effect of around EUR 10 million.

Net income substantially higher in the first nine months

Group sales in the first nine months of 2016 rose by 0.4 percent (Fx & portfolio adj. 3.0 percent) to EUR 34,949 million (9M 2015: EUR 34,800 million). EBITDA before special items advanced by an encouraging 9.4 percent to EUR 9,123 million (9M 2015: EUR 8,340 million). This was due to the substantial increase in sales volumes and the lower cost of goods sold. Bayer achieved this good business development despite dissynergies resulting from the legal independence of Covestro and the sale of Diabetes Care along with higher research and development spending. Earnings were held back by negative currency effects of around EUR 100 million. Net income improved by 16.6 percent to EUR 4,078 million (9M 2015: EUR 3,497 million), and core earnings per share from continuing operations by 7.1 percent to EUR 6.15 (9M 2015: EUR 5.74).

Confidence for the full year 2016

For the Bayer Group, including Covestro, Bayer is still planning sales of EUR 46 billion to EUR 47 billion in 2016. This continues to correspond to a low-single-digit percentage increase (Fx & portfolio adj.). As before, Bayer plans to increase EBITDA before special items by a high-single-digit percentage. It is now Bayer's aim to also increase core earnings per share from continuing operations by a high-single-digit percentage (previously: a mid- to high-single-digit percentage). This takes into account Covestro's inclusion at around 64 percent starting on April 19, 2016 (January 1 to April 18, 2016: around 69 percent).

Bayer continues to plan sales of approximately EUR 35 billion for the Life Science activities, i.e. the Bayer Group excluding Covestro. This still corresponds to a mid-single-digit percentage increase (Fx & portfolio adj.) as previously forecasted. As before, it is planned to raise EBITDA before special items by a mid- to high-single-digit percentage. This planning includes dissynergies of around EUR 130 million from the legal independence of Covestro and from divestments.

For Pharmaceuticals, Bayer continues to expect sales above EUR 16 billion. As before, this corresponds to a high-single-digit percentage increase on a currency- and portfolio-adjusted basis. Bayer continues to plan to raise sales of the recently launched Pharmaceuticals products toward EUR 5.5 billion. The company is still expecting a low-teens percentage increase in EBITDA before special items and aims to improve the EBITDA margin before special items.

In the Consumer Health Division, Bayer continues to expect sales to come in at approximately EUR 6 billion. As before, the company plans to grow sales by a low- to mid-single-digit percentage on a currency- and portfolio-adjusted basis. EBITDA before special items is still expected to come in on the level of the prior year.

In light of the persistently weak market environment, Bayer continues to expect Crop Sciencesales to be on the prior-year level on a currency- and portfolio-adjusted basis. As before, this is equivalent to reported sales of about EUR 10 billion. Bayer continues to expect a low-single-digit percentage decrease in EBITDA before special items for this division.

At Animal Health, Bayer continues to expect sales to be slightly above the prior-year level and is still planning a currency- and portfolio-adjusted sales increase by a low- to mid-single-digit percentage. The company now expects EBITDA before special items of Animal Health to come in on the level of the prior year (previously: increase by a low- to mid-single-digit percentage).

For 2016, Covestro is still expecting a sales decline. For the full year, EBITDA after adjustment for special items is expected to come in at about EUR 1.9 billion (previously: at least at the prior-year level for the second half of 2016).

"Bayer and Monsanto are a perfect fit"

Bayer reached a major milestone on September 14, 2016, with the signing of a binding agreement to acquire Monsanto for USD 128 per share, representing a transaction value of around USD 66 billion.

"This step is entirely logical," said Baumann. "The two companies are a perfect fit and complement each other ideally. We will combine our strengths in seeking solutions to one of the major societal challenges: how to feed a substantially growing global population in an ecologically sustainable way."

Bayer's portfolio will be tailored to the needs of customers throughout the world – from large-scale commercial operations in the United States to smallholder farmers in India. The transaction is subject to customary closing conditions, including approval of the merger agreement by a majority of Monsanto's stockholders and receipt of required approvals from the relevant antitrust and other authorities.

Bayer has initiated the process of obtaining these approvals. It intends to submit the necessary application in the United States before the end of this year and in the European Union probably in the first quarter of 2017. In terms of financing, Bayer successfully closed syndication of the USD 57 billion bank facilities at the beginning of October. Refinancing in the capital markets will depend on respective market conditions and might be executed in part well in advance of closing of the transaction, which Bayer expects by the end of 2017. 

The complete financial report is available at www.quarterly-report-2016-q3.bayer.com.

Bayer Issues New Bonds With a  Volume of 15 billion U.S. Dollars

Successful international placement secures long-term financing of the Monsanto acquisition / Issue of eight tranches with maturities of three to 30 years was approximately three times oversubscribed

Originally Published by Bayer.

Via its subsidiary, Bayer U.S. Finance II LLC, Pittsburgh, United States, the Bayer Group is issuing bonds with a volume of 15 billion U.S. dollars guaranteed by Bayer AG. The placement comprises eight tranches with differing maturities and exclusively targets international institutional investors. It was approximately three times oversubscribed and will secure the long-term financing of the Monsanto acquisition.

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Monsanto Company Awards $500,000 Grant to T-REX to Support New Resource Center for Geospatial Innovation

Currently more than 200 small companies and start-ups are housed at T-REX, which is also located about two miles away from the National Geospatial-Intelligence Agency construction site.

REUTERS

Originally Published by Monsanto.

In its continued support of geospatial innovation, Monsanto Company has awarded a $500,000 grant to T-REX, a St. Louis based non-profit business and technology incubator to support the creation of a new Geospatial Resource and Innovation Center.

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Bayer Closes Monsanto Acquisition

J.P. Morgan assisted Bayer with processing the purchase price payment for the largest acquisition in the company's history.

Originally Published by Bayer.

Bayer successfully completed the acquisition of Monsanto on Thursday. Shares in the U.S. company will no longer be traded on the New York Stock Exchange, with Bayer now the sole owner of Monsanto Company. Monsanto shareholders are being paid 128 U.S. dollars per share. According to the conditional approval from the United States Department of Justice, the integration of Monsanto into Bayer can take place as soon as the divestments to BASF have been completed. This integration process is expected to commence in approximately two months.

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Monsanto and 2Blades Foundation Collaborate to Combat Devastating Soybean Disease


"Collaboration with industry is vital to ensure that new discoveries made in the lab can lead to innovations that will prevent crop losses caused by plant disease," said Dr. Peter van Esse, leader of the 2Blades Research Group at TSL.

REUTERS

Originally Published by Monsanto.

Monsanto Company and charitable organization 2Blades Foundation (2Blades) have formed a new collaboration to discover novel sources of genetic resistance to Asian soybean rust (ASR). 2Blades will deliver resistance genes in further collaboration with The Sainsbury Laboratory (TSL, Norwich, UK), the leading global institute for research on plant-pathogen interactions, and the Universidade Federal de Viçosa (UFV), a leading university in agricultural sciences in Brazil.

Asian soybean rust, a disease caused by the fungus Phakopsora pachyrhizi, results in yellowing and browning of soybean leaves and can lead to premature senesence and significant yield loss. According to the U.S. Department of Agriculture (USDA), P. pachyrhizi has spread rapidly and causes yield losses from 10 to 80% in Argentina, Asia, Brazil, Paraguay, South Africa, and Zimbabwe.1

"Asian soybean rust is an ugly and expensive disease that can devastate farmers' harvests," said Jeremy Williams, Monsanto's biotechnology and ag productivity innovation lead. "Current fungicide treatments can provide some control, but farmers need more tools – and the 2Blades research could help provide a durable solution as part of an integrated pest-management system."

2Blades' mission is to contribute to global food security by developing crops with long-lasting resistance to pathogens in order to reduce losses due to disease. By working with world-leading plant scientists, 2Blades seeks to discover new sources of disease resistance in nature and transfer them into important crops to extend the breadth of their immune system and secure yields.

"Collaboration with industry is vital to ensure that new discoveries made in the lab can lead to innovations that will prevent crop losses caused by plant disease," said Dr. Peter van Esse, leader of the 2Blades Research Group at TSL. "It is therefore exciting to see that our scientific expertise and knowledge on plant-microbe interactions will be combined with Monsanto's capacity to deliver solutions to farmers to tackle a key challenge in soybean cultivation."

"The management of soybean rust requires the integration of different approaches, including disease resistance. This collaboration will allow us to use cutting-edge technologies to speed up the identification of new resistance genes that can be used to deliver more sustainable solutions to soybean farmers, reducing the environmental and economic impact of ASR," said Prof. Sérgio H. Brommonschenkel at UFV.

In January 2017, Monsanto, 2Blades and The Sainsbury Laboratory announced a collaboration focused on tackling corn disease complexes such as stalk and ear rots that have the potential to significantly reduce yield. That research is ongoing and is independent of this new collaboration.

The ASR collaboration complements Monsanto's work to expand the global crop protection toolbox while enabling farmers to produce more with less of an impact on the environment. 2Blades retains rights to deploy new leads arising from the program in crops for smallholder farmers in the least developed countries, with a particular focus on sub-Saharan Africa. Soybean is a crop of significant and increasing importance in Africa, with extraordinary nutritional, soil, and economic benefits. However, the presence of ASR throughout the African continent is a major factor limiting production.

Monsanto: Mark Edge on WEMA, the Fall Armyworm and farmers in Africa

Mark Edge, Director of Collaborations for Developing Countries at Monsanto, talks about WEMA, the initiative that uses Bt maize to eradicate a harmful pest and help smallholder farmers in Africa.

REUTERS

By Mark Edge

Originally Published by Monsanto.

My work at Monsanto over the years has offered me many new challenges – lately I'm working with a team on the complex issue of helping smallholder farmers in Africa get better seed to help them manage the threats to their maize crops.

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