Bayer's Monsanto Bid Lifts Agribusiness ETFs

Both MOO and VEGI track global agricultural companies engaged in agri-chemicals, animal health , fertilizers, seeds, traits, farming, irrigation, farm machinery and various agricultural production. XLB tracks the broader materials sector, including a 71.6% tilt toward the chemicals sub-sector, which covers agri-chemical and fertilizer companies.

Bayer said it would finance the Monsanto deal through a combination of debt and equity, including a share sale worth 25% of the total transaction.

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However, the German company faces large investor scrutiny as many are concerned about the firm’s relatively high debt levels. On the other hand, Bayer’s Chief Financial Officer Johannes Dietsch argued that the future cash-flow generation from a combined Bayer and Monsanto would allow the company to quickly deleverage.

“We will increase our debt level on our balance sheet substantially,” Dietsch said on a conference call. “We are willing to take a higher debt level with a strong desire to reduce that debt level thereafter with strong cash flows.”

For more information on the agribusiness market, visit our agribusiness category.

VanEck Vectors Agribusiness ETF