Monsanto rejects Bayer bid

Monsanto, the world’s largest seed company, has rejected Bayer AG’s US$62 billion acquisition bid as “incomplete and financially inadequate” but hasn’t slammed the door on further talks.

Reuters on Tuesday quoted two unnamed sources as saying Monsanto can see the logic of combining with the German drugs and crop chemicals group, as per Bayer’s proposal released Monday, and believes a deal could get the necessary antitrust and other regulatory approvals.

In a company statement Tuesday, Monsanto described itself as “open to continued and constructive conversations to assess whether a transaction in the best interest of Monsanto shareowners can be achieved.”

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Monsanto said its board hasn’t yet set a timeline for any “further discussions” on the matter and emphasized there’s “no assurance” that a deal would be done or an agreement entered.

“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 CEO Hugh Grant said in the company’s release.

“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.”

Bayer will now have to decide whether to raise its bid, even as the company faces criticism from some shareholders that its $122-per-share offer is already too high. The other options are to walk away, or mount a hostile bid (all figures US$).

It was not clear what price Monsanto would be willing to sell for.

The St. Louis, Mo.-based company has confidence in its standalone plan and believes shareholders deserve a better offer, said Reuters’ two sources, who asked not to be identified because the deliberations are confidential.

Global agrochemicals companies are racing to consolidate, partly in response to a drop in commodity prices that has hit farm incomes. Seeds and pesticides markets are also increasingly converging.

ChemChina plans to buy Switzerland’s Syngenta for $43 billion, after Syngenta rejected a bid from Monsanto. Dow Chemical and DuPont are forging a $130 billion business.

With German rival BASF having previously considered a tie-up with Monsanto, Bayer has moved to avoid being left behind.

Leverkusen-based Bayer’s unsolicited bid for Monsanto is the largest all-cash takeover on record, according to Thomson Reuters data, just ahead of InBev SA’s $60.4 billion offer for Anheuser-Busch in June 2008.

Bayer said on Monday it would finance its cash bid with a combination of debt and equity.

Reporting for Reuters by Greg Roumeliotis and Mike Stone in New York, Patricia Weiss in Frankfurt and Pamela Barbaglia in London. Includes files from AGCanada.com Network staff.

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