Monsanto Bid

Bayer Ups the Ante

Bayer CEO Werner Baumann source picture alliance Sven Simon 63209507
Big plans: Bayer's Werner Baumann.
  • Why it matters

    Why it matters

    Bayer and Monsanto are trying to keep up with a wave of consolidations in the global chemicals industry.

  • Facts

    Facts

    • Bayer raised its bid to purchase Monsanto to $64 billion from $62 billion or three dollars more per share.
    • Bayer said it decided to increase its bid after new information came to light during confidential talks with Monsanto.
    • Monsanto has agreed to consider the new offer, but the company is also reportedly in talks with BASF to combine its agrochemicals business.
  • Audio

    Audio

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In an attempt to force Monsanto into submission, Bayer has offered the U.S. seeds and pesticides maker $64 billion ($58 billion), an additional $2 billion over its previous bid or $3 more for every share.

“Bayer has the determined intention of concluding this transaction,” Chief Executive Werner Baumann said.

Monsanto has agreed to review the new offer, which is 40 percent more than the U.S. seed company’s closing stock price on May 9, the day before Bayer went public with its original acquisition plans.

“Bayer has held confidential talks with Monsanto in the past weeks,” the company said in a statement. “Due to additional information, Bayer has increased its offer from $122 to $125 per share.”

“A poker game is taking place between Bayer and Monsanto.”

Bernhard Weininger, Analyst, Independent Research.

Bayer didn’t elaborate on what new information it had received.

Monsanto rejected Bayer’s original acquisition bid in May. After reporting lower-than-expected quarterly earnings last month, Chief Executive Hugh Grant said Monsanto was still open to negotiations with Bayer, but was also considering alternatives.

Among those alternatives is an apparent bid by Monsanto to ward off Bayer by combining its agrochemicals business with BASF, the news agency Bloomberg reported on Thursday.

BASF, the world’s largest chemicals firm, would receive in return newly issued Monsanto shares, according to the report.

“A poker game is taking place between Bayer and Monsanto, so to speak. Monsanto will try to improve and strengthen its negotiation position with the help of this report,” said Bernhard Weininger, a Frankfurt-based analyst at Independent Research.

Hours before Bayer announced its new offer, Mr. Weininger said the company would like to perform due diligence and look at Monsanto’s internal business records before increasing its bid. Monsanto, he said, only wants to give Bayer a look at its books after it first raises its bid.

“Bayer currently is in a better position than Monsanto, judging from the recent drop of Monsanto’s shares and the not-so-outstanding earnings from Monsanto,” Mr. Weininger said. “There is also the question of what makes most sense for Monsanto’s shareholders, who now have the option of a bid. There is shareholder pressure, which is relevant.”

The U.S. agrochemical company’s board was split over which deal would be best, Bloomberg said, citing people familiar with the matter. Some executives prefer Monsanto to remain independent, while others favor taking the Bayer bid.

“It is rather unlikely that Monsanto will buy this business from BASF because BASF has always emphasized it wanted to keep the operations,” Mr. Weininger said.

“[BASF] wants to expand the division, for instance with acquisitions, small takeovers,” he added. “BASF will look what it could buy from divested operations by the combination of DuPont and Dow and the Syngenta-ChemChina tie-up.”

Earlier this year, Monsanto held talks with Bayer and BASF about potential deals after the U.S. company lost out to Chinese rival ChemChina for Syngenta, Bloomberg reported in March, citing people familiar with the matter.

Monsanto and Bayer have been locked in a struggle to keep pace with a wave of consolidations in the global chemicals industry.

U.S. rivals Dow Chemical and DuPont are merging into three new companies, and Chinese chemicals firm ChemChina bid $43-billion in February for Swiss seeds maker Syngenta. BASF last month agreed to buy surface treatment business Chemetall for $3.2 billion from U.S. peer Albemarle.

 

Gilbert Kreijgers and Spencer Kimball are editors with Handelsblatt Global Edition. To contact the author: kreijger@handelsblatt.com

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