Intesa Sanpaolo’s leading role in providing acquisition finance for Bayer’s $66 billion takeover of Monsanto was in no small way a product of its shakeup of corporate investment banking and the decision to establish a sector-coverage platform.
Intesa Sanpaolo participated as bookrunner and mandated lead arranger (MLA) for a total of $2.6 billion in the deal.
Equally significant, though, it was testament to the Italian bank’s growing reputation in the international arena. It joined the biggest global players in a highly-successful funding operation that made the deal possible.
Intesa Sanpaolo’s role in Bayer’s $66 billion takeover of Monsanto was testament to its growing reputation
One of Intesa Sanpaolo’s aims in reorganising was to develop a more focused corporate and investment banking structure. The division adopted a sector-coverage model in the last years, whereby corporates are grouped according to their industries and areas of activity.
Basic materials and healthcare coverage is one of 11 different categories. Its head, Guido Austoni, is in no doubt that the new structure helped the bank in winning a role in the Bayer-Monsanto transaction. “It was a fundamental step which has consolidated the bank’s ability in the largest M&A deals. It completed the disruptive innovation process,” he explains.
The reorganisation brought together people from inside Intesa Sanpaolo with others who had gained experience elsewhere. Austoni, who joined from Mediobanca, believes it has been a good mix. “It was an effective blend of experience and fresh blood,” he says.
“The market is continuing to sparkle as cheap debt and low interest rates favour leveraged buyouts"
Guido Austoni, Global Head of Basic Materials and Healthcare at Intesa Sanpaolo
“Intesa Sanpaolo’s investment banking has strong potential for international development. We are leaders in the domestic market and need to challenge ourselves on big global deals,” he adds.
Austoni’s department has already clocked up valuable expertise in its work for international clients. It has been a lively period for M&A in healthcare. Deals worth $350 billion were done in 2015, but fell slightly to $280 billion last year; figures for 2017 are expected to be broadly the same.
Intesa Sanpaolo contributed finance to all the major mergers including Teva Pharmaceutical’s $41 billion acquisition of Allergan’s global generics business and Syngenta’s $43 billion takeover of ChemChina.
The latter was part of an intense phase of consolidation that has reduced the agrochemicals and fine chemicals market to a handful of players and paved the way for Bayer’s acquisition of Monsanto. “We have built up a very strong track record, playing a more international role in many deals along the way,” Austoni says.
Intesa Sanpaolo’s achievements meant that it was in a good place when it approached Bayer to be part of the financing team for its all-cash offer for Monsanto. The bank already had a relationship with Bayer, through its German office. Austoni believes the bank’s reputation in acquisition finance was also likely to have been an important consideration for the German group.
The deal had been in the air for a while, although the atmosphere was always friendly. According to Austoni, Bayer’s management wanted to make an acquisition but shareholders were initially worried about losing the group’s healthcare focus by moving further into the seed and agrochemicals markets.
“We are not just a lender; we can help with strategy, too. We have strong offices in London and New York. So I think we can use this footprint to expand”
“It is important to build a role in the sector. You need to have a strong balance sheet and show that you can perform. Working with other banks which are making the market could be important, too. It is very valuable to show you are consistent and reliable,” Austoni explains.
The market is continuing to sparkle as cheap debt and low interest rates favour leveraged buyouts. “I see good growth,” says Austoni. “The international business is the interesting one. We have to define our position in it. It is not always easy because we still do not have big market share, but we are making good progress.”
Intesa Sanpaolo’s basic materials and healthcare sector coverage has a diversified portfolio with around 40 per cent pharma, 20 per cent materials and 40 per cent chemicals. There may be more to do with Bayer as it looks to divest assets in areas such as radiology after it completes the merger with Monsanto.
“We are not just a lender; we can help with strategy, too. We have strong offices in London and New York. So I think we can use this footprint to expand,” Austoni says.
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