Bayer strikes $66 billion deal to buy US giant Monsanto in biggest deal this year

German crops giant Bayer clinched a $66 billion takeover of US rival Monsanto today after promising a higher compensation fee if the deal is thwarted by competition regulators.

Bayer’s 20-strong board signed off the merger after Monsanto’s executives, who include Scottish chief executive Hugh Grant, agreed to an improved $128-a-share offer.

The deal is the largest mergers and acquisitions tie-up this year. The breakthrough came after Bayer agreed to pay Monsanto, based in Missouri, a break fee of $2 billion, up from $1.5 billion, if the deal collapses because of competition concerns.

"We believe that this combination with Bayer represents the most compelling value for our shareowners, with the most certainty through the all-cash consideration," Grant said.

The merger is due to create the world’s biggest supplier of seeds and pesticides to farmers but faces several regulatory hurdles, which have proved a challenge to similar-sized takeover deals in the past.

The merged company would be responsible for about a third of all crop-related sales to farmers around the world. Bernstein research analysts say there is only a 53% chance the deal will be approved because of the regulatory problems, based on the results of a survey of shareholders in both companies.

Bayer and Monsanto’s controversial involvement in genetically modified foods and chemicals is also likely to attract attention from politicians and anti-GM protesters.

The offer, a 21% premium to Monsanto’s US share price yesterday, is the fourth time of asking for Bayer after it originally came in with a $122-a-share offer four months ago. That was increased to $125 in July and then again to $127.50 in recent days.

Bank of America Merrill Lynch and Credit Suisse advised Bayer alongisde Rothschild. Monsato used Morgan Stanley and Ducera Partners.