Explanatory Notes

Acquisitions, Divestments and Discontinued Operations

Planned acquisitions

With regard to the planned acquisition of Monsanto, we refer to the Annual Report 2017. Following the approval by the authorities in Brazil, China and the European Union of the planned acquisition of Monsanto by Bayer, nearly two-thirds of the approvals have been granted. Closing of the transaction is currently expected in the second quarter of 2018.

Divestments and discontinued operations

Bayer ceded de facto control of Covestro and deconsolidated the company at the end of September 2017. As of the loss of control, Covestro fulfills the conditions for presentation as a discontinued operation. In connection with the sale of Covestro AG shares in 2017, Bayer AG entered into derivative contracts. These resulted in Bayer AG retaining economic exposure to the price of Covestro AG shares. In the first quarter of 2018, Bayer generated income after income taxes of €8 million from these contracts.

Income Statements for Discontinued Operations

 

 

Covestro

 

Diabetes Care

 

Total

 

 

Q1 2017

Q1 2018

 

Q1 2017

Q1 2018

 

Q1 2017

Q1 2018

 

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

1

For definition see Annual Report 2017, Chapter “Alternative Performance Measures Used by the Bayer Group.”

Net sales

 

3,564

 

128

 

3,692

Cost of goods sold

 

(2,358)

 

(7)

 

(2,365)

Gross profit

 

1,206

 

121

 

1,327

Selling expenses

 

(346)

 

(1)

 

(347)

Research and development expenses

 

(64)

 

 

(64)

General administration expenses

 

(112)

 

(2)

 

(114)

Other operating income / expenses

 

5

10

 

5

 

10

10

EBIT1

 

689

10

 

123

 

812

10

Financial result

 

(53)

 

 

(53)

Income before income taxes

 

636

10

 

123

 

759

10

Income taxes

 

(171)

(2)

 

(24)

 

(195)

(2)

Income after income taxes

 

465

8

 

99

 

564

8

of which attributable to noncontrolling interest

 

190

 

 

190

of which attributable to Bayer AG stockholders (net income)

 

275

8

 

99

 

374

8

In the first quarter of 2018, the discontinued operations affected the Bayer Group statement of cash flows as follows:

Cash Flows from Discontinued Operations

 

 

Covestro

 

Diabetes Care

 

Total

 

 

Q1 2017

Q1 2018

 

Q1 2017

Q1 2018

 

Q1 2017

Q1 2018

 

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

Net cash provided by (used in) operating activities

 

275

 

15

 

290

Net cash provided by (used in) investing activities

 

(112)

 

 

(112)

Net cash provided by (used in) financing activities

 

(1)

 

(15)

 

(16)

Change in cash and cash equivalents

 

162

 

 

162

As no cash was assigned to the discontinued operation Diabetes Care, the balance of the cash provided is deducted again in financing activities.

Assets held for sale

In connection with the planned acquisition of Monsanto, Bayer signed an agreement with BASF on October 13, 2017, concerning the sale of selected Crop Science businesses. The businesses to be sold comprise Bayer’s global glufosinate ammonium business and the related LibertyLink™ technology for herbicide tolerance and a substantial part of the field crop seed business, including the related research and development capabilities. The seeds business being divested includes the global cotton seed business (excluding India and South Africa), the North American and European canola seed business, and the soybean seed business. The agreed base purchase price of €5.9 billion excludes the value of any net working capital and is subject to the customary adjustment mechanisms.

In connection with the planned acquisition of Monsanto and the associated merger control proceedings, Bayer has undertaken to divest, in addition to the divestments detailed above, its entire vegetable seeds business, its R&D platform for hybrid wheat, its remaining canola seed business, three research projects in the area of nonselective herbicides, its global digital farming business and business activities in the field of seed treatments. BASF is the intended purchaser of these assets.

The transactions are subject to regulatory approval as well as the successful closing of Bayer’s acquisition of Monsanto. Bayer will continue to own, operate and maintain these businesses until the closing of these divestments.

On January 30, 2018, the Pharmaceuticals Division signed agreements to sell its MK Generics business in Central America and the Caribbean to Tecnoquímicas S.A. The business to be sold includes the Bonima production plant in El Salvador. The base purchase price is €44 million.

The assets and liabilities held for sale are presented below:

Assets and Liabilities Held for Sale

 

 

March 31, 2018

 

 

€ million

Goodwill

 

587

Other intangible assets

 

380

Property, plant and equipment

 

1,277

Other assets

 

334

Deferred taxes

 

135

Inventories

 

413

Cash and cash equivalents

 

6

Assets held for sale

 

3,132

Provisions for pensions and other post-employment benefits

 

37

Other provisions

 

44

Financial liabilities

 

15

Other liabilities

 

376

Deferred taxes

 

48

Liabilities directly related to assets held for sale

 

520

Compare to Last Year