Bayer offers unsolicited bid for Monsanto

May 19, 2016, 11:49 AM EDT
(Source: Global Justice Now/flickr)
(Source: Global Justice Now/flickr)

Bayer offered an unsolicited takeover bid for agrochemicals firm Monsanto, but it was met with widespread skepticism.

Bloomberg reports:

Bayer AG’s unsolicited takeover offer for Monsanto Co. met with skepticism as concerns mounted that the German company would need to take on too much debt and dilute equity holdings in its quest to acquire an embattled target. Shares of Bayer plunged to the lowest in 2 1/2 years in Frankfurt after the drugmaker confirmed an offer to buy the world’s largest seed producer, which has a market value of about $45 billion, for an undisclosed amount. Monsanto’s stock also posted muted gains, rising less than 5 percent. Bloomberg News was first to report a week ago that Bayer was exploring a bid to become the world’s biggest supplier of farm chemicals. The proposal by Werner Baumann, who’s been at Bayer’s helm for less than a month, follows Monsanto’s failed attempt to buy Syngenta and the proposed merger of Dow Chemical Co. and DuPont Co. St. Louis-based Monsanto said it’s reviewing the offer, without disclosing the terms. To help finance its quest to buy the world’s largest seed maker, Bayer is considering asset disposals and a share sale, according to people familiar with the matter. “The acquisition is just one notch too big,” said Markus Manns, who oversees about $250 million in assets at Union Investment GmbH, including Bayer shares, in Frankfurt. “It is unclear why, of all things, they would choose to do it now.”

CBS News writes:

The bid comes amid widespread challenges in the agribusiness industry, thanks to sliding commodity prices that's prompted a 19 percent plunge in Monsanto's share price over the past year. While Bayer may hope the companies could prove stronger together than as rivals, there are many hurdles to overcome before a deal could take place, including antitrust issues. A merged Bayer-Monsanto would control about 28 percent of the world's pesticides, 36 percent of U.S. corn seeds, and 28 percent of soybean seeds, according to Dow Jones, citing Morgan Stanley estimates. That may not go over well with either government regulators or consumers, especially given resistance among activists to Monsanto's GMOs and products like Roundup. Monsanto has inspired hashtags such as #monsantoevil, with Modern Farmer magazine noting that the company had become "the face of corporate evil" in the views of some.

Reuters notes:

Bayer, which has a market value of $90 billion, said the merger would create "a leading integrated agriculture business", referring to Bayer's push to seek more synergies from combining the development and sale of seeds and crop protection chemicals. Most of the major agrichemical companies are aiming to genetically engineer more robust plants and custom-build chemicals to go with them, selling them together to farmers who are struggling to contend with low commodity prices. While no takeover price was mentioned by either company, Bernstein Research analyst Jeremy Redenius estimated that it would be 41.9 billion euros ($47 billion), plus 6.7 billion euros in assumed debt. He said that Bayer might need a 27 billion euro share issue to help to fund the purchase. Citi analysts have said that Bayer would probably need to pay 14-16 times Monsanto's core earnings, implying a takeover price including debt of 57 billion euros to 65 billion euros.