Farm Ireland

Monday 23 April 2018

Bayer takeover of Monsanto would trigger huge paydays for executives

Montsanto makes the controversial weedkiller Roundup, the world's best-selling herbicide. Photo: (c) Ilfede |
Montsanto makes the controversial weedkiller Roundup, the world's best-selling herbicide. Photo: (c) Ilfede |

Pamela Barbaglia and Tom Bergin

Monsanto chief Hugh Grant could land more than €63m if his firm - the world's largest seed company - is taken over by German chemicals giant Bayer AG.

The US firm said it was open to engaging in further negotiations with Bayer after turning down its €56bn bid as "incomplete and financially inadequate" last week.

That $122-per-share offer would allow CEO and chairman Grant to walk away with a total package of more than €110m after a takeover, including from the sale of shares and the exercise of options he already owned, a Reuters analysis of Monsanto filings shows.

But €66m of that represents gains that the 58-year-old Scot could make as a result of the Bayer courtship - largely thanks to increases in the value of his stock options.

The gains also reflect the rise in the value of his shareholdings and an accelerated payout of bonuses that would kick in if there is a takeover, as well as a €12m 'golden parachute' severance payment he would receive if he loses his job as a result.

There is no certainty that ongoing negotiations will result into a deal although Monsanto's board has signalled interest in reaching an accord with Bayer.

Grant, who is eligible for retirement, said that his company firmly endorsed "the substantial benefits an integrated strategy could provide to growers and broader society" after the bid was snubbed on Tuesday.

Even should a deal be struck, it is not certain that Grant would be ousted. But in most takeovers, the CEOs of the targets tend to exit after their companies are sold. The agrochemicals mega-deal between Dow Chemical and Dupont agreed in December - an unusual case because it was billed as a "merger of equals" of two companies of roughly equal size - will see both CEOs depart.

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Grant's exposure to shares and options means he has an incentive to hold out for the highest possible sale price in any deal, which would not only be in the interests of shareholders but also increase the value of his holdings. A $130-per-share bid, for example, would lift his holdings by another €11m, the Reuters analysis shows.

A spokesman for St Louis-based Monsanto declined to comment on its compensation scheme.

The company, which makes Roundup - the world's most widely used herbicide - has been wrestling with low crop prices and spending cutbacks by North American farmers, which have hit its profits.

Before reports about a potential Bayer bid in early May, Monsanto's shares were trading at around $90. At that price, Grant's share options were worth around €900,000.

But at $122-per-share, they are worth over €44m.

Other top executives would also benefit from a takeover.

Brett Begemann, president and chief operating officer, could walk away with a total of €32.5m for his shares and in gains on his options, accelerated bonuses and severance, should a deal be done at $122-a-share and his job terminated.

Such an accord would make him about €18m better off than he was based on the pre-bid share price. But there are more executives in line for big paydays. The other three directors whose total pay is disclosed in filings - chief financial officer Pierre Courduroux, chief technology officer Robert Fraley, and general counsel David Snively - could walk away with a total of over €50.5m in shares, bonuses and severance if a deal goes through.

Any merger of Bayer's agrochemicals operations with Monsanto's would be the second "mega-deal" in the industry in recent months after the creation of DowDuPont, a €117bn giant.

The departing CEOs of Dow Chemical and DuPont will walk away with a combined €72m.

Dow Chemical's Andrew Liveris will get €47.5m in cash, stock and other payments, including about €36m he is already entitled to on his retirement, DowDuPont said in a regulatory filing. DuPont's Edward Breen will get €24.4m, DowDuPont said.


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