DD DuPont de Nemours Inc

By Jacob Bunge and Dana Mattioli 

Bayer AG has approached Monsanto Co. about a takeover that would fuse two of the world's largest suppliers of crop seeds and pesticides, according to people familiar with the matter.

Details of the offer couldn't be learned and it's unclear whether Monsanto will be receptive to it.

Should the bid succeed, a combination of the companies would boast $67 billion in annual sales and create the world's largest seed and crop-chemical company. A successful deal would ratchet up consolidation in the agricultural sector, after rivals Dow Chemical Co., DuPont Co. and Syngenta AG struck their own deals over the past six months.

But there's no guarantee regulators would bless such a tie-up, and if Monsanto isn't on board, winning such approval could be an even greater challenge. Indeed, people familiar with the matter have questioned whether Monsanto would be interested in such a deal.

Absorbing St. Louis-based Monsanto, the world's top seed company in terms of sales, would push Bayer far more deeply into agriculture, which currently accounts for about 22% of the German company's business. Monsanto's $15 billion in seed and herbicide sales would make agriculture about 40% of the combined entity's business, with the rest coming from pharmaceuticals and consumer health products.

The approach comes as the agricultural sector faces heavy pressure after three years of sliding crop prices, which slashed U.S. farmers' income to the lowest level in over a decade and forced companies to cut prices on seeds while scaling back research and laying off staff. Monsanto in May cut its profit forecast for the year and said it is eliminating about 16% of its employees.

Folding Monsanto's world-leading seed franchise and its trademark Roundup herbicide business into Bayer would create a company with a combined $68 billion in annual sales, marketing products ranging from Aspirin pain-relief pills to crop genetics that enable plants to withstand bugs and weedkillers. The combination would sell about 28% of the world's pesticides and about 36% of U.S. corn seeds and 28% of soybean seeds, according to Morgan Stanley estimates.

(More to come.)

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(END) Dow Jones Newswires

May 18, 2016 22:24 ET (02:24 GMT)

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