Monday - June 4, 2018
News Conference Call

Address by Werner Baumann, Chairman of the Board of Management, and Liam Condon, President Crop Science Division

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/// Werner Baumann ///


Ladies and gentlemen:

Welcome to today’s press conference call and thank you for taking the time to join us at such a short notice.

I’m happy to share with you today that we’re about to reach our goal of closing the acquisition of Monsanto. Last time we spoke was in February on the occasion of the full-year results. At that time, I expressed our confidence in closing the acquisition in the second quarter.

Since then, we have made great progress. We have received all required approvals from regulatory authorities. We are therefore delighted to confirm that we plan the closing of the transaction on June 7.

As announced last week, according to the conditional approval of the U.S. Department of Justice, the integration of Monsanto into Bayer can take place as soon as the divestments to BASF have been completed. This is expected to be in approximately two months.

Over the past two years, we’ve worked very hard to reach this stage. I would like to take just a moment to thank our team who has shown exemplary leadership and commitment during this period. To give you a sense of their tremendous effort:

We estimate that we’ve submitted around 40 million pages of documentation to the European Commission and the U.S. Department of Justice alone. Printed out and laid end-to-end, this would nearly reach from Leverkusen to St. Louis and back.


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An incredible team effort has brought us to this point. We are about to close the transaction to soon create a new leader in agriculture. The acquisition means that we will double the size of our current business with a truly excellent combination of talent, technologies and customer reach.

And — as Liam will go into later — there’s never been a more exciting time to be in agriculture. The sector offers long-term growth potential, driven by a need for accelerated innovation — innovation that we will be perfectly positioned to deliver. This is vital to produce more healthy, safe and affordable food for a growing population in a more sustainable manner.

As a future leader in this space, we at Bayer will have a special responsibility. And we will do everything we can to live up to this responsibility. We will uphold the highest ethical, environmental and social standards, engage all stakeholders, and contribute to better and more sustainable agriculture.


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Over the past few years, we’ve focused our portfolio on building leading businesses in health and nutrition. At the same time we exited the performance materials business with the successful IPO of Covestro.

Now, the acquisition of Monsanto represents an important and logical step in the evolution of Bayer towards a leader in life sciences.

Here you can see Bayer’s pro forma sales for 2017. Including Monsanto, our businesses in health and agriculture would have been roughly equal in size. Total pro forma sales would come to around 45 billion euros including combined Crop Science sales of around 20 billion euros.

The 20 billion euros of sales are already adjusted for the 2.2 billion euros in sales that we had to divest to receive approval for the transaction. The divestments amount to approximately 10 percent of revenue for the combined Crop Science division. We will receive a base purchase price of 7.6 billion euros from these divestitures.


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But what’s even more important than our size is the innovation we will deliver as a combined company and the value this transaction will create. Here you can see the financial targets for the acquisition, which we have slightly adjusted to reflect the changed parameters, including the required divestitures.

First, we expect a positive contribution to core earnings per share starting in 2019. From 2021 onwards, we expect that contribution to be double-digit percentage.

Second, adjusted for divestments, we expect synergies to deliver annual contributions of 1.2 billion U.S. dollars to EBITDA before special items as of 2022.

And third, we expect the combined business to generate industry-leading profitability.

Looking forward, market growth this year is expected to pick up again for the first time in three years. Monsanto has already shown its resilience with strong recent performance. That makes this a great time to close the acquisition.

I’d also like to take a moment to provide you with an update on our refinancing measures. Bayer secured initial bridge financing of 57 billion U.S. dollars, which, as announced in September 2016, is being refinanced by a combination of equity and debt transactions. Some of them have already been completed. The final equity measure will be a rights issue, which was announced yesterday.

Now I would like to turn over to my colleague, Liam Condon, our head of the Crop Science division. There is no better person to lead our combined business going forward! Liam will share some thoughts on what this means for agriculture and innovation.


/// Liam Condon ///


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A warm welcome from my side as well! I believe there has never been a more exciting time to be in agriculture. When I talk to farmers around the world, no matter the size and type of their farms, they all face a common challenge: How to grow more healthy, safe and affordable food in a sustainable way?

In 2050, our planet will be home to almost ten billion people – 2.2 billion more than today.

However, land used for agriculture can hardly be expanded. That’s why per capita acreages are decreasing, as you can see on the slide. There’s also a growing threat to harvests from extreme weather conditions and a changing climate.

We’re going to have to significantly increase agricultural production in a more resource-efficient, sustainable way. To do so, we are investing in innovation that will benefit farms of all sizes, all over the world. We will help our customers to grow more with less and will do this with a strong emphasis on sustainability and social responsibility.


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As a combined company, we will be in a better position to help farmers address the significant challenges they face. With a highly talented and responsible global team, we will advance agriculture through breakthrough innovation that benefits farmers, consumers and our planet.

Our combined portfolio will bring together outstanding seeds and plant traits – where Monsanto is a leader – and chemical and biological crop protection – which is where Bayer’s strengths are. These capabilities, combined with our expanded digital tools through the Climate platform, as well as agronomic insights, will allow us to develop truly customized solutions that meet the specific needs of our customers.


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Innovation will be the driving force behind making these solutions a reality.

Yet innovation of the magnitude needed requires a high level of investment. And that’s another reason why combining our expertise and resources is crucial.

We are a company with tremendous innovation capabilities. Including Monsanto and taking the divestitures into account, Bayer’s total R&D investment in 2017 would have been around 5.7 billion euros. Of that, 2.4 billion euros would have been spent in the combined agriculture business on a pro forma basis. We will have more than 35 R&D sites and over 175 breeding stations across the globe. Additionally, our approximately 8,000 R&D employees are in our labs, offices and in the field with our customers every day.

But figures like these are only part of the story. What’s more important is what’s behind them. Our peoples’ passion for discovery and collaboration, our expertise in state-of-the-art technologies, and our profound understanding of plants, soil and entire ecosystems.


Against this background we can confidently say that the combination of the two businesses will allow us to deliver more innovation faster than any other company in this industry and provide solutions tailored to the needs of farmers around the world.
And with this, back to Werner.


/// Werner Baumann ///


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Thanks, Liam. As I said at the start, we are fully aware of the heightened responsibility that a leadership position in agriculture entails. We will live up to our responsibility – to farmers, to consumers worldwide, and to the environment.

Sustainability and responsibility are deeply anchored in our corporate culture. This is what we have stood for and what we will continue to stand for in the future. Our annual report showcases how we’ve measured up to these standards. And I can assure you that we will apply the same rigor in achieving our sustainability targets as we do to our financial targets.

As we proceed with the integration, we will define ambitious goals to track our commitments, specifically in three areas.

First: As a leader, we are fully committed to upholding the highest ethical and responsibility standards. For example, we took on a leading position for transparency in the agriculture industry, publishing safety studies on crop protection products on a dedicated website.

Second: Many people still don’t have adequate access to nutritious food and modern medicines. Drawing from our core competencies in these areas, we will seek to make a greater contribution to improving health and nutrition for those who need it and often times don’t have a voice.

Finally: We will work to further reduce our environmental footprint, for example by using our product portfolio to make food production more environmentally friendly and further reducing emissions.


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So what’s next? We plan to close the acquisition on June 7, at which time Bayer will become the sole shareholder of Monsanto Company. According to the conditional approval of the U.S. Department of Justice, the integration of Monsanto into Bayer can take place as soon as the divestments to BASF have been accomplished.

We have diligently prepared for the upcoming integration over the past two years. Our extensive experience in integrating other large companies has proven that we can and will be successful.

Our success will depend on developing a joint corporate culture, one that unites all employees. While there are naturally some differences, we have much more in common that we can build on. We share fundamental values, and both companies have a strong focus on innovation and on our customers.

You could say that our cultures, just like our product portfolios, are complementary.

Yet our success also depends on our ability to build trust. This is why we aim to deepen our dialogue with society. We will listen to our critics and work together where we find common ground.

Agriculture is too important to allow ideological differences to bring progress to a standstill. We have to talk to each other. We need to listen to each other. It’s the only way to build bridges.

And finally, I’d like to address our company’s future brand architecture. The company name is and will remain Bayer. Monsanto will no longer be a company name. The Bayer Cross is a global icon for trust, competency and quality. The acquired products will keep their brand names and thrive as part of the Bayer portfolio.


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Let me finish by summarizing why I am so excited and optimistic about our future.

There are five points that I believe will be critical to our success – both as a company and as a member of society:

- innovation powered by science,
- a clear commitment to sustainability and responsibility,
- a focus on delivering a strong performance based on financial strength and efficient processes,
- a portfolio management approach that creates value for our stakeholders,
- and our strong Bayer brand, a global icon for quality and integrity.

Thanks to our leading positions across all businesses, we are perfectly positioned to address long-term trends such as population growth and demographic change. And we have top-tier innovation potential.

At the same time, we will work hard to maintain and further build the trust of our customers and the public each and every day – with transparency, openness and honesty.

Every day, we strive to improve the lives of our customers and patients in a responsible and sustainable way.

This is our purpose: Science for a better life.

And now we welcome your questions.

Thank you.

Cautionary Statements Regarding Forward-Looking Information
Certain statements contained in this communication may constitute "forward-looking statements". Actual results could differ materially from those projected or forecast in the forward-looking statements. The factors that could cause actual results to differ materially include the following: the risk that the parties may be unable to achieve expected synergies and operating efficiencies in the merger within the expected time-frames (or at all) and to successfully integrate Monsanto Company's ("Monsanto") operations into those of Bayer Aktiengesellschaft ("Bayer"); such integration may be more difficult time-consuming or costly than expected; revenues following the transaction may be lower than expected; operating costs, customer loss and business disruption (including difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater or more significant than expected following the transaction; the retention of certain key employees at Monsanto; the parties' ability to meet expectations regarding the accounting and tax treatments of the merger; the impact of refinancing of the loans taken out for the transaction; the impact of indebtedness incurred by Bayer in connection with the transaction and the potential impact on the rating of indebtedness of Bayer; the effects of the business combination of Bayer and Monsanto, including the combined company's future financial condition, operating results, strategy and plans; other factors detailed in Monsanto's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") for the fiscal year ended August 31, 2017 and Monsanto's other filings with the SEC, which are available at http://www.sec.gov and on Monsanto's website at www.monsanto.com; and other factors discussed in Bayer's public reports which are available on the Bayer website at www.bayer.com. Bayer assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

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