Germany’s Bayer increases offer for seed company Monsanto

Importantly, Bayer says it submitted its new offer verbally on July 1 and formally on July 9 – five days before Thursday’s public announcement.

As In-PharmaTechnologist.com previously reported, analysts suggest the deal could be detrimental the company’s core pharma business.

Bayer in May offered to buy Monsanto for $62 billion – a value that, like the current aggregate amount, includes debt.

The company added that it is confident it will obtain all necessary regulatory approvals in a timely manner.

It said it had also offered a US$1.5 billion reverse antitrust break fee – payable if a proposed deal fails to gain antitrust approvals – saying this was “reaffirming its confidence in a successful closing”.

“Looking at the agricultural chemicals and seeds landscape, Monsanto-BASF is the most logical combination”, said Christian Faitz, an analyst at Kepler Cheuvreux, who has a buy rating on BASF and estimates the enterprise value of the Ludwigshafen-based company’s division to be as much as 20 billion euros ($22 billion).

Monsanto, which is based in St. Louis, Missouri, rejected the initial offer as “incomplete and financially inadequate”.

The seeds and agrochemicals industry, long dominated by six large companies, has been jolted by several large deals in the past year as low crop prices and belt-tightening by farmers pressured earnings.

In other words, Bayer just spent weeks in private talks with Monsanto only to see that company try to make an acquisition of its own.

So far, investors appear skeptical that either Bavarian suitor has what it takes. In return, BASF would likely receive recently provided shares in Monsanto, Bloomberg stated, pointing out individuals familiar with the matter.

The discussions are at an early stage, and no final decisions have been made, the report said, citing the people. Its Board of Directors will review the proposal in consultation with its financial and legal advisors. The bid was disclosed after Bayer shares stopped trading in Germany. He also spun off the company’s specialty-plastics business.

Bayer emphasized that the new offer was firm, in the sense that it was not contingent on obtaining financing.

Bayer’s relatively modest price increase in its offer also reflects the view that Monsanto’s recent poor earnings have weighed on its valuation.