Bayer makes takeover bid for seeds firm Monsanto
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GERMAN drugs and chemicals group Bayer has made an unsolicited takeover proposal to United States seeds company Monsanto, aiming to create the world’s biggest agricultural supplier and take advantage of converging pesticides and seeds markets.
Monsanto disclosed the approach on Wednesday before Bayer confirmed its move yesterday, though neither released proposed terms.
The US$42 billion market capitalization of Monsanto means the deal would eclipse ChemChina’s planned acquisition of Swiss agrichemicals firm Syngenta — a target Monsanto itself pursued last year — and could face US antitrust hurdles.
A Monsanto statement said its board was reviewing the proposal, which is subject to due diligence, regulatory approvals and other conditions. There is no assurance that any transaction will take place, it said.
UBS Global Asset Management, which Reuters data show is among Bayer’s 30 biggest investors, said it was “deeply concerned” about the burden on Bayer’s finances from a takeover, saying it would prefer the companies to agree a joint venture or a nil-premium merger.
Deutsche Bank analysts said a deal could shift Bayer’s center of gravity to agriculture, accounting for about 55 percent of core earnings, up from roughly 28 percent last year, excluding the Covestro chemicals business Bayer plans to sell.
That would have a negative impact on sentiment among Bayer’s health care-focused investor base, the bank said.
Bayer, which has a market value of US$90 billion, said the merger would create “a leading integrated agriculture business.”
Most of the major agrichemical companies are aiming to genetically engineer more robust plants and custom-build chemicals to go with them, selling them together to farmers who are struggling to contend with low commodity prices.
While no takeover price was mentioned, Bernstein Research analyst Jeremy Redenius estimated it would be 41.9 billion euros (US$47 billion), plus 6.7 billion euros in assumed debt.
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