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Inside the biggest-ever all-cash merger: How JPMorgan moved $57 billion in 6 hours so Bayer could pay for Monsanto

June 11,2018 14:13

In the early hours of that morning in New York, London employees wake up for business and start collecting the money. At around 2:00 a.m. in New York, or 7:00 a.m. in the European capital, lenders in Asia and Europe began wiring money into an account ...



JPMorgan CEO Jamie Dimon.REUTERS/Gary Cameron

JPMorgan collected almost $57 billion in cash so the German drugmaker Bayer could pay for its purchase of Monsanto in the biggest all-cash acquisition of all time. 
While not advising on the deal, JPMorgan was chosen to handle the operational complexity of moving around the money. 
The bank has been investing in its treasury-services business for times like this. 
The day had finally arrived.
Almost two years after Bayer first made an offer to acquire Monsanto, and almost 18 months after the German drugmaker finally secured a $66 billion deal to buy the agrochemical company, it was time last week to close the transaction. 
And when it came to paying for the largest all-cash acquisition in history, Bayer turned to JPMorgan, a bank that had been conflicted out of advising on the original deal. The US bank was entrusted with the unglamorous but enormously important work of collecting nearly $57 billion in cash from dozens of banks spread across multiple time zones, aggregating it into a single account and alerting other parties (the remaining $9 billion was financed through asset sales). 
All before Monsanto shares opened for trading. 
Here's how the bank pulled off what could have been an operational nightmare. The account is based on conversations with people directly involved or briefed on the process, who asked to speak anonymously to describe private transactions. 
The money starts moving
For weeks before the deal closed, Bayer executives called on the lenders who had committed to financing the acquisition, reminding them of their obligation. As regulators signed off on asset sales that were a precondition of antitrust approval, Bayer's treasurer, Christian Held, gave lenders an even firmer deadline: the morning of June 7, the date the deal was scheduled to close. 
In the early hours of that Thursday morning in New York, London employees wake up for business and start collecting the money. At about 2 a.m. in New York, or 7 a.m. in the European finance capital, lenders in Asia and Europe began wiring money into an account at JPMorgan's London branch. At the same time, JPMorgan opens an internal call known as a bridge joined by members of various teams including operations, credit, and fraud prevention. It stays open for the duration of the transfer. 
The banks use instructions and an account number given during planning calls and emails earlier in the week. The money comes from loans, promised to Bayer more than a year and a half earlier to back the firm's purchase of Monsanto.
In the old days, things would have played out much more slowly. A bank acting as an agent like JPMorgan would have collected the money over the course of several days leading to the deal closing, making the transfer much more simple operationally, the people said.
But with the passage of capital rules in the years after the financial crisis, firms have been discouraged from holding overnight cash. That makes it necessary to collect the money during a single day, a much tighter time frame.
The sun begins to rise in New York
As JPMorgan receives the complete amount from each of the 30 syndicate banks, it transfers the money from the London account into a corresponding one in New York. Dashboards managed by the bank show the money arriving, sending the account balance climbing higher like a fuel gauge showing a car's gas tank. 
By the time the sun begins to rise over the New York skyline, JPMorgan employees in Europe are ready to hand off to their US colleagues. At 6:30 a.m. New York time, all of the money is in. 
Fourty-five minutes later — less six hours after the funds began flowing into JPMorgan's account —Bayer's lawyers conduct a call with representatives of the bank and Computershare, a record keeper, on the line. They execute closing paperwork, similar to the closing of a home purchase.
Still missing is money sitting in money market mutual funds where Bayer stashed cash for the acquisition. The accounting systems for those funds don't open until 7:30 a.m., requiring JPMorgan to front several billion dollars for a few minutes. That's on top of the firm's promise to cover 20% of the borrowed funds if another bank can't come through or suffers a technology glitch. 
In all, JPMorgan collects roughly $43 billion in financing from a syndicate of 30 banks and another $14 billion in cash. 
Finally, Bayer's treasurer gives instructions for JPMorgan to send $57 billion to Computershare. The record keeper confirms receipt. 
With the money counted, paperwork must be filed. At 8 a.m. on June 7, the courts in Delaware open. Monsanto, incorporated in the state, files a certificate of merger with the Secretary of State. It also releases a stop transfer letter to Computershare, acting as transfer agent.
It is one of the last steps needed before contacting the New York Stock Exchange, which ensures Monsanto shares don't open for trading.
The biggest balance transfer of all time had taken place without a hitch. 
This post has been updated from its original version to clarify why JPMorgan wasn't an adviser on the deal.

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