Bayer has increased its takeover bid for Monsanto to $127.50/share, valuing Monsanto at $65 billion. Bayer says that it is in “advanced negotiations with Monsanto concerning a proposed transaction.”
Monsanto confirms that it has received the proposal and “has been engaged in constructive negotiations with Bayer.” Monsanto adds that it is “continuing these conversations as it evaluates this proposal, as well as proposals from other parties and other strategic alternatives to enable its board to determine if a transaction in the best interests of its shareowners can be realized.” Monsanto has declined to comment on the other proposals and strategic alternatives.
Bayer and Monsanto say separately that there can be no assurance the companies will enter into an agreement. “Key terms and conditions have not been agreed,” Bayer says.
It is the second time that Bayer has increased its bid for Monsanto. Bayer originally bid $122/share in May for Monsanto and increased the offer to $125/share on 19 July. Monsanto rejected the second bid as “financially inadequate and insufficient to ensure deal certainty” but said it was open to continuing negotiations with Bayer and granted Bayer some access to its accounts for the purposes of due diligence. Analysts believe that Monsanto values itself at more than $130/share. Jonas Oxgaard, analyst at Bernstein (London), interprets Bayer’s increased bid as evidence that “due diligence is over, and the two parties are now negotiating a transaction price.” Monsanto shares closed at $107.44/share in New York on 2 September.
German newspaper Handelsblatt said last month that Bayer would consider a hostile bid for Monsanto if Monsanto continues to reject friendly approaches from Bayer. Bayer would require approval from its supervisory board for a hostile approach. However, analysts caution that Bayer’s latest offer may indicate that the company is not willing to meet Monsanto’s preferred price. “We see the fairly modest raise as further indication that Bayer is feeling stretched by this deal, and is not willing to go north of $130,” Oxgaard says. “We see a relatively low probability that Monsanto will accept something close to $127.50/share.”
Acquiring Monsanto would make Bayer a worldwide leader in agricultural chemicals and seeds. However, surveys show that the proposed transaction does not have the full support of Bayer shareholders. The deal would also likely face substantial regulatory hurdles in the United States and European Union. Bayer proposed a $1.5-billion reverse antitrust breakup fee with its offer in July but it has not mentioned an increased breakup fee with the latest offer.
Bayer-Monsanto is one of a number of multibillion-dollar M&A deals being discussed in the worldwide ag sector. PotashCorp’s possible merger with Agrium, confirmed last week, is the latest of these. Others include ChemChina’s proposed takeover of Syngenta and the Dow Chemical-DuPont merger.
By Ian Young
Source: Chemical Week
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