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Bayer’s $62 Billion Bid Rejected by Monsanto, says Open to Talks

Bayer’s $62 Billion Bid Rejected by Monsanto, says Open to Talks
Terming the bid by Bayer AG as "incomplete and financially inadequate", Monsanto Co, the world's largest seed company, turned the $62 billion acquisition bid while saying that the company was open to engage further in negotiations.
Even as Bayer faces criticism from some shareholders that its $122-per-share cash offer is already too high, Monsanto's decision puts pressure on Bayer to decide whether to raise its bid.
Underscoring some investor skepticism that a deal can be done, Monsanto shares ended trading up 3.1 percent at $109.3 in New York, substantially below Bayer's bid price. In Frankfurt, there was a rise of 3,23 percent in Bayer shares.
"We believe in the substantial benefits an integrated strategy could provide to growers and broader society, and we have long respected Bayer’s business," Monsanto Chief Executive Hugh Grant said in a statement.

"However, the current proposal significantly undervalues our company and also does not adequately address or provide reassurance for some of the potential financing and regulatory execution risks related to the acquisition," he added.
While saying that it looks forward to engaging in constructive discussions with Monsanto, Bayer responded that its $122 per share offer represents "full and certain value" for Monsanto shareholders.
"We are confident that we can address any potential financing or regulatory matters related to the transaction. Bayer remains committed to working together to complete this mutually compelling transaction," Bayer Chief Executive Officer Werner Baumann said in a statement.
While several analysts have suggested Bayer would have to pay much more than the current offer to clinch a deal, it was not clear what price Monsanto would be willing to sell.
"We believe it is unlikely that the deal gets done at $122 and still believe $135 is a more likely price," JPMorgan analysts wrote in a research note last week.
Manning & Napier Advisors LLC agreed with Monsanto's decision to seek a higher offer. This investment management firm is Monsanto's 14th largest shareholder according to Thomson Reuters data.
"Monsanto's assessment that the initial offer was inadequate is valid, as we believe it does not appropriately value the company’s existing product portfolio," said Michael Knolla, a managing director at Manning & Napier.
Driven in part and as a response to a drop in commodity prices that has hit farm incomes, Global agrochemicals companies are racing to consolidate. This has driven Monsanto to consider a tie-up to build strength.
In March, Bayer had been approached by Monsanto who showed interest in buying the former’s crop science unit. An outright acquisition of the crop science unit, a joint venture or other type of partnership between the two companies was among the possibilities that were discussed at that time according to media reports.
After Syngenta rejected a bid from Monsanto, ChemChina plans to buy Switzerland's Syngenta for $43 billion. A $130 billion business is being forged by Dow Chemical Co and DuPont.
Bayer has moved its latest bid to avoid being left behind after German rival BASF SE having previously considered a tie-up with Monsanto.
According to Thomson Reuters data, just ahead of InBev SA's $60.4 billion offer for Anheuser-Busch in June 2008, Leverkusen-based Bayer's unsolicited bid for Monsanto is the largest all-cash takeover on record.

Christopher J. Mitchell

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