Monsanto, seed giant, receives takeover offer from chemicals-maker Bayer

The deal could create the world's biggest supplier of seeds and pesticides.

Anjali Cordeiro
Thursday 19 May 2016 08:05
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Corn at Monsanto’s research centre in Missouri
Corn at Monsanto’s research centre in Missouri

Monsanto, the world’s largest seed maker with a market value of $42 billion, said it received an unsolicited takeover approach from Germany’s Bayer, the latest step in the consolidation of the global seed and crop chemical industry.

The proposal was non-binding, St. Louis-based Monsanto said in a statement Thursday, without giving financial details. Monsanto’s board of directors is reviewing the proposal in consultation with its advisers, and there’s no assurance that any deal will be entered into, it said.

Merging Monsanto with the company that invented aspirin would bring together brands such as Roundup, Monsanto’s blockbuster herbicide, and Sivanto, a new Bayer insecticide.

A wave of deals is already reshaping the seed and crop-chemicals industry. Chinese National Chemical agreed in February to acquire Switzerland’s Syngenta for about $43 billion, months after Monsanto abandoned its own bid for Syngenta.

DuPont and Dow Chemical plan to merge in a $65.6 billion deal and then carve out a new crop-science unit.

A completed acquisition would extend a record-setting pace of consolidation in the global chemicals sector, which has seen $84 billion of deals this year as low crop prices encourage mergers, according to data compiled by Bloomberg.

With a premium, a takeover of Monsanto could surpass ChemChina’s purchase of Syngenta as the largest acquisition globally this year, the data show.

Monsanto shares closed at $97.13 in New York trading on May 18. Bayer shares dropped 3.35 per cent to €93 at 8.17 a.m in Frankfurt.

“Despite the ongoing consolidation in the agrochemicals market, we believe there is no need for Bayer to rush into a deal with Monsanto,” Bankhaus Lampe KG analyst Volker Braun said in a research note. “We see enough opportunities arising from pending M&A transactions in the industry to buy assets at better prices and more favorable risk profiles.”

Agricultural Commodities

Monsanto is facing a slump in agricultural commodities and its offer to buy Syngenta for about $46.2 billion was spurned last year. Sales in the quarter ending in February fell 13 per cent from a year earlier to $4.53 billion.

Prices for corn and soybeans declined in the last three calendar years, hurting demand for everything from tractors to weedkiller.

A deal with Bayer would help the company reduce its reliance on the agriculture industry, while Monsanto would strengthen Bayer’s seed business, one of the company’s priorities.

Morgan Stanley & Co. and Ducera Partners are Monsanto’s financial advisers, and Wachtell, Lipton, Rosen & Katz is its legal adviser.

Bayer in an e-mailed statement confirmed that it had recently met with Monsanto executives to “privately discuss a negotiated acquisition” of the seedmaker.

Bloomberg News reported earlier this month that Bayer had been exploring a potential bid for Monsanto in a deal that would create the world’s largest supplier of seeds and farm chemicals, citing people familiar with the matter.

Monsanto was founded in 1901, its first product the artificial sweetener saccharin. It introduced one of its first genetically modified seeds in 1996, Roundup Ready soybean, spawning heated controversy with critics of biotechnology. Bayer’s products range from blood thinner Xarelto to consumer products and pest-control treatments for farmers.

Bayer is transitioning to new leadership. Strategy head Werner Baumann took over from Chief Executive Officer Marijn Dekkers this month. Dekkers reshaped Bayer, increasing its focus on life sciences by buying Merck & Co.’s over-the-counter medicines business and divesting a stake in its plastics unit.

© 2016 Bloomberg L.P

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