Bayer sweetens takeover bid again as Monsanto mulls alternatives

[CHICAGO] Bayer AG sweetened its takeover bid for Monsanto Co a second time and said the two are in advanced talks as the German chemical company seeks to become the world's largest producer of seeds and pesticides.

Bayer would be prepared to pay US$127.50 a share provided a negotiated deal can be reached, it said Monday in a statement.

The new offer is 2 per cent more than Bayer's previous bid and 19 per cent above S. Louis-based Monsanto's last closing price.

There's no assurance an agreement will be reached, Bayer said. Monsanto said that it's evaluating the Bayer offer as well as proposals from other parties and strategic alternatives.

The latest offer, which values Monsanto at about US$56 billion excluding debt, falls short of some predictions about what the company will have to pay to secure a takeover agreement.

Analysts at Sanford C Bernstein have previously said Monsanto may decide to sell if Bayer raises its offer to S$135 a share.

Shares of Bayer slumped almost 0.8 per cent to 94 euros as of 9.28am in Frankfurt trading. The stock has declined about 19 per cent since the start of this year.

Bayer made its first offer of US$122 a share in May. That was rejected by Monsanto as too low, as was the higher offer of US$125 a share made in July, but Monsanto later granted its suitor some access to its financial accounts for the purposes of due diligence ahead of a potentially revised bid.

Monsanto's shares have declined since Bayer's initial bid in May, and closed at US$107.44 in New York on Friday. There was no trading Monday because of the Labour Day holiday.

The offer from Bayer marks a reversal of roles for the US company. Monsanto has long sought to become a one-stop shop for farmers by boosting its crop chemicals portfolio to complement its seeds business.

To that end, it had pursued the purchase of Syngenta AG on at least three separate occasions over the years.

The crop and seed industry is being reshaped by a series of large transactions that may end up leaving just a few global players who can offer a comprehensive range of products and services to farmers.

China National Chemical Corp agreed in February to acquire Syngenta. Meanwhile, DuPont Co and Dow Chemical Co plan to merge and then carve out a new crop-science unit.

Monsanto called off its Syngenta bid last year, while more recently it has revived talks to buy BASF SE's agrochemicals unit. Falling crop prices have weighed on Monsanto's profits and share price in the past year, making it vulnerable to a takeover.

Buying Monsanto would give Bayer a company that's both the world's largest seed supplier and a pioneer of crop biotechnology.

The kind of genetically modified seeds that Monsanto started to commercialise two decades ago now account for the majority of corn and soybeans grown in the US.Monsanto also sells seeds in foreign markets including Latin America and India.

The company was founded in 1901 and its first product was saccharin, the artificial sweetener. It produced highly toxic polychlorinated biphenyls, known as PCBs, until the late 1970s, and was also among companies to manufacture the mixture of herbicides known as Agent Orange.

In the past two decades it has pioneered the commercialisation of genetically modified organisms, or GMOs. GMO varieties of corn and soybeans now account for the majority of those crops in the US.

BLOOMBERG