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Monsanto Rejects Bayer Offer, Demands More

Monsanto Rejects Bayer Offer, Demands MoreMonsanto Rejects Bayer Offer, Demands More

Monsanto, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate”, but said it was open to further  negotiations.

However, the seed company suggested Tuesday that a higher bid might be accepted, saying it remains open to talks. Bayer replied it is committed to completing the deal that would create the world’s biggest agricultural supplier, NewEurope reported.

Monsanto chairman and CEO Hugh Grant also said in a written statement that the initial offer failed to address potential financing and regulatory risks. He also raised concerns about whether a deal would be approved by regulators.

Monsanto’s decision, first reported earlier on Tuesday by Reuters, puts pressure on Bayer to decide whether to raise its bid, even as the company faces criticism from some shareholders that its $122-per-share cash offer is already too high.

It was not clear what price Monsanto would be willing to sell for but several analysts have suggested Bayer would have to pay much more than the current offer to clinch a deal.

A combination of the two businesses would create a giant seed and farm chemical company with a strong presence in the US, Europe and Asia. Both companies are familiar brands on farms around the globe.

Bayer’s farm business produces seeds as well as compounds to kill weeds, bugs and fungus. Monsanto, based in St. Louis, produces seeds for fruits, vegetables and other crops including corn, soybeans and cotton, as well as the popular weed-killer Roundup.

After 2015’s blistering global buyout pace, 2016 is shaping up to be a sequel.

There has been more than $494 billion in global deals already in 2016, the third highest of all time, and 2016 is just behind 2015 so far.

The same drivers from 2015 exist this year. Mergers beget mergers, so when two companies in a sector combine, their competitors seek to do the same in order to compete. Low interest rates that make borrowing cheap, huge stockpiles of cash held by corporations, and a lackluster environment for organic growth continues to push global mergers.

Financialtribune.com