Bayer AG and Monsanto Co Advance Talks

Bayer AG has agreed to offer Monsanto Co more than US$65 billion for acquisition.Bayer AG is a German pharmaceutical and crop chemicals manufacturing company. It is now offering the world’s largest seeds company, Monsanto Co, more than 2% of its previous offer. An insider has confirmed that both the companies are on the verge of reaching an agreement. Two sources have confirmed that Monsanto Co will also allow Bayer AG to conduct checks on their business prior to the acquisition.

Bayer AG’s bid

The earlier offer made by the German company was already the biggest all-cash acquisition bid made by any company. It had offered US$125 per share but is now offering Monsanto Co US$127.50 per share. Bayer is willing to negotiate. Rheinische Post, the German daily newspaper, has reported that US$130 per sharemay be required to finalize the deal in an amicable manner.

The German company is aiming to wrest the highest rank in a fast consolidating farm supplies industry by combining its business in crop science with that of Monsanto’s business in seeds. As reported by Reuters, an insider has confirmed that Bayer will do whatever it takes – it may prepare to make a friendly deal or a hostile bid or may simply pull its offer.

Reactions from analysts

On Tuesday at 0934 hours (GMT), Bayer’s shares had fallen by 0.25% to 94 Euros. Last heard, Monsanto’s shares had last been traded for US$107.44. Analysts at Equinet, the brokerage, feel that this will help Bayer successfully cap its bid. Their understanding of Bayer’s statement after the failure to seal a deal with Monsanto at US$127.50 per share is that Bayer is now either ready to make a hostile bid at a lesser consideration or will make no deal at all.

But analysts from Baader Helvea are not agreeing with the analysts from Equinet. They expect Bayer to make an offer of US$130-135 per share. They feel that the shares of Bayer will continue to remain under pressure while the negotiations are still on. Some shareholders with Bayer feel that a higher bid will make the German company more synonymous with the agriculture business and not with the pharmaceutical business.

On Monday, Monsanto made a statement saying that it is having ‘constructive’ negotiations with Bayer and has been offered a non-binding proposal of US$127.50 per share. It is still evaluating the all-cash offer made by Bayer AG.                  

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