What Should Bayer And Monsanto Shareholders Think About The $122 Per Share Bid?

Bayer’s $62 billion all-cash offer for Monsanto was publicly disclosed earlier today. My five thoughts on the proposed transaction, in no particular order:

Point #1: Monsanto’s growth has come entirely from buybacks of late.

In 2012, Monsanto made profits of just a hair under $2 billion. In 2016, Monsanto is on pace to make a little bit over $2 billion. Specifically, the change is from $1.997 billion to $2.0250 billion, for a cumulative growth rate of 1.40%. And yet, Monsanto has covered up some of this core business stagnation by taking on enormous sums of debt in recent years to retire shares and boost the earnings per share.

Back in 2012, Monsanto had a nearly pristine balance sheet. It was carrying $2 billion in long-term debt, and was making $2 billion in annual profits. That’s exceptional financial strength for a company that requires moderate ongoing capital expenditures. And now? Monsanto … Read the rest of this article!