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Bayer’s Takeover of Monsanto Called to Vote by Investors by Henderson

Bayer’s Takeover of Monsanto Called to Vote by Investors by Henderson
Claiming that the proposed merger of Monsanto and Bayer posed threat to the long-term strength of the German chemicals group, a vote on Bayer’s $64 billion-plus proposed takeover of Monsanto has been demanded by Henderson Global Investors, a minority investor in Bayer.
A major departure from a strategy of focus and integration of existing acquisitions" that Bayer had consistently communicated to the market for a number of years was represented by the bid for the U.S. seeds company by Bayer, said Asim Rahman, European equities fund manager at Henderson, one of Bayer's 20 largest investors with a 0.7 percent stake.
In an effort to entice its reluctant management to give the German company full access to its books, the largest ever all-cash takeover bid on record was made for Monsanto on July 14 by Bayer through the announcement of a sweetened $125-a-share offer for the US seed company.
With the aim to partly offset a sharp drop in commodities prices that has hit the incomes of some of their biggest agricultural customers, global agrochemical firms have been weighing a string of big-ticket mergers with rivals in recent months.
In the hope that a likely increased conglomerate discount on its share price relative to peers could be minimized, Henderson's Rahman also called for a shareholder vote on the deal to restore investor trust and ensure support for Bayer's future strategic direction, in a letter to the company, which would help achieve the above.

"We cannot accept the Board's decision to deny shareholders any opportunity to vote on it ... Technically the transaction does not require shareholder approval, but an endorsement by shareholders would provide an opportunity to repair market trust in the investment case," he said.
He was unconvinced that the deal would create value for shareholders, Rahman said after a meeting with Bayer in May.
"The acquisition terms reflect paying a very high valuation multiple and the deal could constrain inorganic investment in the pharma division at a time when the future pipeline of this division is a key concern for investors," Rahman said.
"Following a future integration of Monsanto, Bayer could find itself with a weakened pharma business," he added.
Making Bayer's offer reflect a premium of around 25 percent over current stock values, the share value of Monsanto closed at $100.50 on Monday. at 0900 GMT on the same day, there was a fall of .4 percent in the shares of Bayer which stood at at 91.6 euros a share.
Fears that the German firm could be tempted to bid even higher to secure its prize while rival buyers like BASF wait in the wings were flagged by other minority investors who echoed Henderson's caution over Bayer's high-stakes pursuit of Monsanto.
"I am happy that the new offer made by Bayer did not go as far as $135-$140. However I don't think it will be enough -- Monsanto management rejected the $122 offer as financially inadequate," Andrea Williams, Senior Fund Manager at Royal London Asset Management was quoted by the Reuters in relation to this issue.

Christopher J. Mitchell

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