Bayer sweetens offer for hesitant Monsanto

Fri Jul 15, 2016 12:01am EDT
 
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By Greg Roumeliotis and Karl Plume

(Reuters) - German drug and crop chemical group Bayer AG on Thursday announced details of a sweetened $64 billion bid for Monsanto Co as it tries to put the U.S. seed company under pressure to engage further.

Analysts and some Monsanto shareholders were quick to opine that Bayer's latest offer, the largest all-cash takeover bid on record, was unlikely to entice Monsanto. Bayer, however, is hoping that the sweetened offer will spur enough Monsanto shareholders to call on the company's management to be more accommodative.

Global agrochemicals companies are racing to consolidate, partly in response to a drop in commodity prices that has hit farm incomes. Bayer made its bid for Monsanto public in May, but the two companies have made little progress since in negotiating a deal.

Monsanto Chief Executive Hugh Grant said last month that the company was in talks with Bayer and other companies in its sector about "alternative strategic options." He did not name the other companies, but Reuters has previously reported that Monsanto had discussed a business combination with BASF SE.

Bayer said on Thursday that it had raised its offer to $125 a share from $122 in cash and offered Monsanto a $1.5 billion reverse antitrust breakup fee, "reaffirming its confidence in a successful closing."

"We don't think the higher offer will be enough to entice Monsanto's board. ... We estimate Monsanto would be worth $130 per share in Bayer's hands, which includes our annual run-rate cost-synergy target of $1 billion," Morningstar analysts said in a note.

Bayer also said it had comprehensively addressed Monsanto's questions about financing and regulatory matters, and that it was prepared to make certain commitments to regulators, if required, to complete a deal.

"While the breakup fee begins to address one prominent concern regarding the transaction, the modest increase in the bid still does not fairly value the existing product portfolio, nonetheless Monsanto's strong product pipeline," said Michael Knolla, managing director of Capital Goods & Materials Group for Manning & Napier, the 14th largest Monsanto shareholder according to Reuters Eikon data.   Continued...

 
A Monsanto logo is pictured in the company headquarters in Morges, Switzerland, May 25, 2016.  REUTERS/Denis Balibouse