Monsanto rejects Bayer bid but open to talks

MONSANTO has rejected Bayer’s US$62bn bid for the company but says it remains open to negotiations.

Hugh Grant, Monsanto’s CEO, said Bayer’s proposal “significantly undervalues” the company and is concerned about its financial and regulatory risks. Monsanto said it remains open to talks though, which is hardly a surprise after Bayer revealed earlier this week that Grant had arranged the meeting to discuss creating a combined business. If a deal proves successful the merged company would benefit from Monsanto’s strengths in seeds and Bayer’s in crop protection chemicals.

“We believe in the substantial benefits an integrated strategy could provide to growers and broader society, and we have long respected Bayer’s business,” Grant said in his statement rejecting the offer.
Bayer has replied that it “looks forward to engaging in constructive discussions”.

“We are confident that we can address any potential financing or regulatory matters related to the transaction,” said Bayer CEO Werner Baumann, “Bayer remains committed to working together to complete this mutually compelling transaction.”

Analysts noted before the rejection that they expected Bayer will need to offer a higher price to secure approval from Monsanto’s board. Deutsche Bank analysts believe Monsanto want US$150/share compared to the US$122 offered by Bayer; while JP Moran has put the price at US$135.

If the deal goes through, and following on from the spin-out last year of Bayer’s materials science business, the German firm will have shifted from predominantly a pharmaceutical company – worth two thirds of sales in 2015 – to an even split with crop science.

The offer follows a wave of consolidation in the seed and agricultural chemicals sector. In May 2015, Monsanto attempted to buy its rival Syngenta for US$45bn. Syngenta’s board repeatedly rebuffed the offers, despite revisions, and Monsanto dropped its takeover bid in August. Grant told investors in October last year that he would continue to seek partnerships and opportunistic deals. He told the Wall Street Journal that he believed consolidation was “inevitable”.

In February, ChemChina agreed to buy Syngenta for US$43bn. Meanwhile DuPont and Dow have agreed to merge and split out their own crop-science business.