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Bayer’s Sweetened Offer Rejected by Monsanto, Opens Doors for Talks

Bayer’s Sweetened Offer Rejected by Monsanto, Opens Doors for Talks
While confirming that it was open to further talks with the German healthcare and chemicals group as well as other parties, the U.S. seed company Monsanto Co turned down a sweetened $64 billion acquisition offer from Bayer AG.
Bayer has been put under pressure to sweeten its offer once again due to the widely expected rejection and sweeten it enough to get access to Monsanto's books. There were reports earlier that negotiations about a potential confidentiality agreement was being conducted between the two companies.
Bayer's latest bid was viewed as being "financially inadequate and insufficient to ensure deal certainty" unanimously by the board of Monsanto, the company said.
"Monsanto remains open to continued and constructive conversations with Bayer and other parties to assess whether a transaction that the board believes is in the best interest of Monsanto share owners can be realized," the company said.
Bayer was looking forward to continued dialogue with Monsanto under an appropriate confidentiality agreement that would allow access to additional information, it said while mentioning that it was disappointed with Monsanto's decision to reject its latest offer.
Ever since the German company offered to acquire Monsanto in May, access to confidential information has been a major sticking point in Bayer's negotiations with Monsanto.
The bid was increased by $3 per share by Bayer on Thursday and its latest $125-per-share offer is the largest all-cash bid on record. Equivalent to about 2.3 percent of the deal's value, a $1.5 billion reverse antitrust breakup fee was also offered by Bayer.
In comparison, representing 7 percent of the $43 billion transaction value, the breakup fee ChemChina offered to acquire Swiss peer Syngenta should the deal not go through is $3 billion.
Sources told media that before providing Bayer access to financial information, Monsanto would like Bayer to sweeten its offer further, including increasing the breakup fee.
While Bayer shares were down 1.2 percent at 91.87 euros, Monsanto's shares were up 0.35 percent to $106.81.
Bayer said it was prepared to make certain commitments to regulators, if required, to complete a deal and argued last week that it had comprehensively addressed Monsanto's questions about financing and regulatory matters.
A vote on the proposed takeover of Monsanto has been called for by Henderson Global Investors, an investor in Bayer. According to the investor, the proposed deal threatened the long-term strength of the German company. Concerns the company may overpay to secure a deal have been expected by some other Bayer investors.
The company was in talks with Bayer and other companies in its sector about "alternative strategic options", Monsanto Chief Executive Hugh Grant had said last month. There were reports that Monsanto had discussed a business combination with BASF SE even though he did not name the other companies.
As low crop prices and belt-tightening by farmers pressured earnings, the seeds and agrochemicals industry has been jolted by several large deals in the past year.
A $130 billion mega-merger late last year happened between Dow Chemical Co and DuPont and Syngenta AG agreed in February to be acquired by ChemChina for $43 billion.

Christopher J. Mitchell

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