Dow Jones reports:
Shares in Bayer AG (BAYN.XE) skidded early Wednesday after the company said it placed 4 billion euros ($4.28 billion) in convertible notes in the first step for financing its $57 billion acquisition of Monsanto Co.
At 0918 GMT, Bayer traded 5.0% lower at EUR90.07. A trader said the share decline was related to convertible arbitrage and the share would likely recover in the course of the session. Analysts noted the measures Bayer planned for financing the Monsanto deal were communicated in advance.
Late Tuesday, Bayer said the notes would be converted into shares in November 2019, the first component of Bayer’s plan to raise about $19 billion in equity to fund the acquisition of the U.S. agrochemicals company.
“We are surprised to see Bayer kicking off the refinancing of the Monsanto deal with equity measures,” Warburg Research analyst Ulrich Huwald said. “However, positive is that should increase Bayer’s flexibility in regard to divestments and the timing of placeing debt.”
Bayer said there was “strong interest” in the notes, which were placed overnight. Bayer Chief Financial Officer Johannes Dietsch said the notes were multiple-times oversubscribed, which he called a sign of “the capital market’s confidence.”
In late October, Bayer said it expected the acquisition to close by the end of 2017. The company plans to submit its application to regulatory authorities in the European Union in the first quarter of next year, and to U.S. authorities by the end of this year.
Bayer said the issuance shouldn’t be taken as any indication of discussions with regulators regarding approving the transaction.