World Economy

Bayer Sweetens Offer to Buy Monsanto Seed Company

Bayer Sweetens Offer to Buy Monsanto Seed CompanyBayer Sweetens Offer to Buy Monsanto Seed Company

Just six months ago, Monsanto, the world’s largest seed company, was still painting itself as a predator, saying it would continue to seek acquisitions in crop chemicals after failing to buy Syngenta in August.

Now, the company is the prey and some investors say they are fine with the switch, BDLive reported.

Bayer sweetened its offer to $125 a share—a 21% premium to Friday’s closing price. The two companies would probably get together, said Susan Dambekaln at Capital Innovation, which manages $1 billion including 8,526 Monsanto shares. The question is for how much?

“It’s clear that Monsanto wants a transaction at the highest price possible,” said Jim Russell, a portfolio manager at Bahl & Gaynor, which has about $15 billion under management, including 9,300 Monsanto shares. “They are conducting a public auction for the company, and we like the methodology and the tone so far.”

Analyst Brett Wong at Piper Jaffray said a price closer to $140 a share was needed to get the deal done. Russell agreed, saying Bayer needed to come back at least once more with a higher price. Monsanto closed Friday at $103.45. “As long as communication is flowing,” Russell said, “we feel good about a transaction being consummated at the highest price.”

While Monsanto is also in talks to acquire agricultural-chemical assets from BASF, neither Russell nor Dambekaln expect that deal to happen.

Seed and chemical makers are consolidating as they look to expand crop productivity to meet rising food demand. Dow Chemical and DuPont announced a plan in December to merge and then break into three entities including a Monsanto-sized agriculture company. China National Chemical said in February it had reached a deal to buy Syngenta.

In January, Monsanto CE Hugh Grant was pushing for a takeover of Syngenta, saying he saw “significant opportunity there for the integrated platform”. By April, Grant told analysts the company would focus on smaller deals such as joint ventures and partnerships, as well as rely on its own pipeline of innovation. Large-scale mergers and acquisitions, he said then, were no longer a strategy.

The $3-a-share increase probably is not even enough to get Monsanto to open its books for due diligence, according to Jeffrey Zekauskas, a JPMorgan Chase analyst.

Monsanto said the original bid “significantly undervalued” the company and it would be uninterested in transactions at these prices, he said.