Future Perspectives

Planned Acquisition of Monsanto

On September 14, 2016, Bayer signed a definitive merger agreement with Monsanto Company, St. Louis, Missouri, United States, under which Bayer will acquire all outstanding shares of Monsanto Company. On December 13, 2016, the shareholders of Monsanto Company approved the transaction by the necessary majority. In order to prepare the future integration of the Monsanto business, Bayer has initiated a project which will carefully plan the integration process in all business areas so that integration can be achieved after all regulatory approvals have been received. This process will include risk management applying our existing methods. The integration process will start after the transaction is closed, which we currently expect before the end of 2017. Bayer is experienced in successfully integrating acquisitions from a business, geographical and cultural perspective, and in so doing remains committed to its strong culture of innovation, sustainability and social responsibility.

Opportunities

Following the successful integration of the Monsanto business, we see additional opportunities for combining our complementary innovative expertise.

The range and depth of our research and development activities should make it possible to optimize the various technologies so that we can accelerate the time-to-market of enhanced innovations. This optimized product offering to customers in the agriculture sector should contribute to improving their yields and productivity and contribute to greater sustainability in farming.

Risks

On account of the magnitude and importance of the acquisition, material risks related to the transaction are listed below. These risks have not been selected on the basis of the BayRisk process described in Chapter “Group-wide Opportunity and Risk Management System” because Bayer and Monsanto remain separate, independent companies. Instead they have been identified and estimated by the central risk management function based on the information available. The list of risks therefore makes no claim to completeness, nor does the order in which they are listed imply any order of importance.

Requirements for closing

At the present time the possibility cannot be excluded that the planned acquisition will be delayed or not take place at all. The transaction is still subject to the customary requirements for closing, including clearance by the relevant antitrust and other authorities. The necessary approvals may be refused or could be tied to certain divestment actions or other commitments required by regulators of Bayer and/or Monsanto. Such measures could adversely affect our current or future business, financial position, share price or dividend payments. Furthermore, Bayer may not be able to effect commitments in a timely manner, or at all, or on economically viable terms.

The merger agreement also provides for payment by Bayer of a US$ 2 billion reverse break fee including, in particular, in the event that the necessary antitrust approvals are not granted by June 14, 2018, and Bayer or Monsanto therefore terminates the merger agreement.

Strategic or operational objectives may not be met

Our strategic, synergistic and other operational objectives regarding the acquisition and integration of the Monsanto business are based on assumptions and estimates we have made that may prove inaccurate, including Monsanto’s earning potential and cost structure, the synergy and innovation potentials of both companies and future economic developments and market changes. In addition, difficulties may arise in connection with the acquisition and integration of the Monsanto business that adversely impact our current business or may prevent the expected benefits of the acquisition from being fully realized. These include the retention of key employees, important customers, suppliers, partners, licensors or contacts to other stakeholders, unexpected challenges in developing and successfully executing a strategy for the combined business, and risks resulting from management being distracted from the operational business by the agreed transaction. Combining businesses, processes and workforces as intended while retaining multiple corporate locations could be more complex than expected, partly in view of different corporate cultures and divergent internal control and compliance systems. The achievement of expectations in terms of the tax and accounting treatment of the transaction will be subject to a future detailed review. In light of this, unexpectedly high transaction and integration costs along with further risks and/or charges cannot be ruled out. It is also possible that we may be forced to recognize an impairment loss on the intangible assets of Monsanto and the goodwill of Crop Science if unforeseen difficulties were to arise during the integration, if the Monsanto business were to fail to develop as expected or if other business developments affecting Crop Science were to occur that have not been anticipated.

Changes in risk profile

We believe we may face increased or additional risks as a consequence of acquiring and integrating the Monsanto business. However, these risks cannot yet be definitively identified at the present time. Among the possible consequences of taking over the Monsanto business are potential downgrades in sustainability ratings and increased exposure to public criticism.

Risks from the financing of the planned acquisition

We are also exposed to certain risks from the financing of the planned acquisition. These mainly result from the need to refinance the original acquisition financing, the increase in debt and the possible credit rating downgrade by the rating agencies. Risks also arise from the development of the USD / EUR exchange rate and the interest rate level, as well as from potential difficulties in refinancing the transaction with equity capital to the extent planned.