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Bayer set to propose higher Monsanto offer - sources

Sep 14 2016 13:41
Aaron Kirchfeld, Jeffrey McCracken and Naomi Kresge

New York - Bayer is proposing an increased offer and break fee as it tries to clinch the acquisition of Monsanto Company to create the world’s biggest maker of seeds and pesticides, according to people familiar with the matter.

Bayer is willing to raise its offer to about $129 a share, or $56.5bn, from $127.50 a share, and double the antitrust break fee to about $3bn, said the people, who asked not to be identified because the deliberations are private.

Monsanto’s management board was scheduled to discuss and potentially approve the proposal Tuesday, the people said. Bayer’s supervisory board is set to review the deal on Wednesday, and an announcement could come shortly thereafter, the people said. Talks may still fall apart.

The bid is 22% above Monsanto’s closing price on Tuesday in New York. If successful, it would lead to the biggest deal this year and the largest ever by a German company.

Bayer’s wooing of St. Louis-based Monsanto has played out against a backdrop of a rapidly consolidating crop and seed industry as falling crop prices weighed on profits. A series of big deals may leave just a few global players.

China National Chemical Corporation agreed in February to acquire Syngenta, while DuPont Company and Dow Chemical Company plan to merge and then carve out a new crop-science unit.

Three offers

Monsanto shares fell 0.8% to close at $106.10 in New York. Bayer rose 0.8% to 94.05 euros in Frankfurt, valuing the company at €77.7bn.

Spokespeople for both companies declined to comment on the new proposal, which was reported earlier by local German newspaper Rheinische Post.

The Leverkusen, Germany-based company first made an unsolicited offer for Monsanto of $122 a share in May, and then bumped that in July to $125. Both proposals were rejected by Monsanto as too low.

Monsanto later granted access to some financial accounts to conduct due diligence. Last week, Bayer came back with a third offer of $127.50.

GMO pioneer

One impetus for Monsanto is the company’s ambition to become a one-stop shop for farmers, and to sell a comprehensive array of fertilizers and seeds to be used in conjunction with big data applications. That’s how farmers are going to increase productivity and yields to feed a growing world population, the company has said.

For years, Monsanto pursued Swiss pesticide maker Syngenta to boost its farm chemicals portfolio, making three failed offers as recently as last year.

In the past two decades Monsanto has pioneered the commercialization of genetically modified organisms, or GMOs. GMO varieties of corn and soybeans now account for more than 90% of corn and soybean crops in the US.

That may account for the high break fee. The combination of both companies could account for more than 30% of the global crop-inputs business, stoking concern over whether the deal will be passed by competition authorities.

The recent industry consolidation will also leave potentially fewer buyers for any assets sold off by Bayer-Monsanto to satisfy regulators.

Founded in 1901, Monsanto also used to produce pharmaceuticals and industrial chemicals, including highly toxic ones like polychlorinated biphenyls, now banned and commonly known as PCBs, and the herbicide Agent Orange, which was used by the US military in Vietnam.

Bayer was founded in 1863 and made its name by introducing heroin as a cough remedy in 1896 and then aspirin in 1899. Bayer’s stated ambition is to be the global leader in pharmaceuticals and chemicals for people, plants and animals.

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