By Eyk Henning, Jacob Bunge and Christopher Alessi
Bayer AG boosted its takeover offer for Monsanto Co. to about
$65 billion in a bid to overcome the U.S. seed company's resistance
to the tie-up and join a parade of consolidation in the agriculture
industry.
Bayer made the new $125-a-share offer verbally on July 1 and
more formally eight days later, it said in a statement Thursday
confirming an earlier report by The Wall Street Journal. The new
bid represents a $3-a-share -- or $3 billion -- bump from an
earlier proposal Monsanto rejected as too low.
Monsanto said its board will review the new offer, but investor
reaction to the news indicated the market is skeptical the increase
will be sufficient to seal the deal for the German life-sciences
company.
Bayer is pursuing what would be the latest in a succession of
multibillion-dollar merger agreements in the $100 billion global
market for agricultural seeds and pesticides, which has struggled
with a slide in crop prices. Dow Chemical Co. and DuPont Co. struck
a merger deal in December, and Switzerland's Syngenta AG -- which
Monsanto unsuccessfully pursued last year -- agreed in February to
a $43 billion takeover by China National Chemical Corp.
A deal would also reshape Bayer itself, making agriculture
roughly half its overall sales, which has rattled some investors
who view the company more as a health-care player than a producer
of crop seeds.
Bayer said it made the new offer after it received additional
information in private discussions with Monsanto. The two companies
had been at loggerheads over Bayer's desire for access to due
diligence, or detailed information about Monsanto's business, which
Monsanto had refused to give in the absence of a higher offer, the
Journal had previously reported. St. Louis-based Monsanto also had
said Bayer's earlier proposal didn't address potential financing
and regulatory risks.
Bayer said Thursday that it has "comprehensively addressed
Monsanto's questions concerning financing and regulatory matters
and is prepared to make certain commitments to regulators, if
required, to complete the proposed acquisition of Monsanto."
Bayer also offered a $1.5 billion reverse-breakup fee should a
deal be blocked on antitrust grounds.
In the statement, Bayer said it "believes that its offer fully
captures the intrinsic value of Monsanto," adding that the new bid
represents a 40% premium to Monsanto's share price in early May,
before the possibility of a deal first surfaced.
Bayer in May offered to buy Monsanto for $62 billion -- a value
that, like the current aggregate amount, includes debt.
Some Monsanto investors said they were encouraged by signs of
progress in deal talks with Bayer. But a number of analysts have
said they see Monsanto's fair value in a per-share range of more
like $130 to $140, and some predicted Thursday that the new bid
wouldn't be enough to win over the company.
"Ultimately, it's underwhelming," Piper Jaffray analyst Brett
Wong said of the new offer. "The important aspect of today is that
Bayer is committed to the deal on both a regulatory and financial
standpoint."
Monsanto shares were 2.6% higher in midday trading at $103.75, a
price that reflected continued skepticism about the proposed deal
-- given the discount of more than $20 to the latest proposal. The
bid was disclosed after Bayer shares stopped trading in
Germany.
Monsanto Chief Executive Hugh Grant said in late June that while
the company had talked to Bayer about a sale, Monsanto also was
exploring other deal possibilities to deliver the most value to its
shareholders.
Bayer investors have reacted cautiously to the possible deal and
a large share sale that would help pay for it, with the German
company's stock falling when it was originally unveiled. That
likely limits how much Bayer can ultimately offer to pay for its
prey. Bayer CEO Werner Baumann made the initial bid for Monsanto
just two weeks after assuming the top job and has been lobbying the
German company's investors to support the deal.
"There are a number of investors who would have liked us to
further strengthen our health-care business," Mr. Baumann said in
an interview with the Journal last month. But he argued that
enhancing Bayer's agrochemical division through a deal with
Monsanto now "is the most attractive proposition for the company
and for shareholders."
Former Bayer CEO Marijn Dekkers had presided over the launch of
five new blockbuster drugs and the $14.2 billion acquisition of
Merck & Co.'s over-the-counter drug business. He also spun off
the company's specialty-plastics business. Mr. Baumann had first
proposed the idea of a Monsanto takeover last year when he was
running strategy for Bayer, but that the move was strongly opposed
by Mr. Dekkers, people familiar with the matter have said.
Bayer made the new $125-a-share offer verbally on July 1 and
more formally eight days later, it said in a statement Thursday,
confirming an earlier report by The Wall Street Journal. The new
bid represents a $3-a-share bump from an earlier offer that
Monsanto rejected as too low. Monsanto also had said the proposal
didn't address potential financing and regulatory risks.
Bayer said it made the new offer after it received additional
information in private discussions. The two companies had been at
loggerheads over Bayer's desire for access to so-called
due-diligence, which Monsanto had refused to give in the absence of
a higher offer, the Journal had previously reported.
Bayer said Thursday that it has "comprehensively addressed
Monsanto's questions concerning financing and regulatory matters
and is prepared to make certain commitments to regulators, if
required, to complete the proposed acquisition of Monsanto."
Bayer also offered a $1.5 billion reverse-breakup fee should a
deal be blocked on antitrust grounds.
A Monsanto spokeswoman had no immediate comment.
Bayer in May offered to buy Monsanto for $62 billion, a value
that, like the current aggregate amount, includes debt.
In the statement, Bayer said it "believes that its offer fully
captures the intrinsic value of Monsanto," adding that the new bid
represents a 40% premium to Monsanto's share price in early
May.
A number of analysts have said they see Monsanto's fair
valuation in a per-share range of $130 to $140.
Natalia Drozdiak
contributed to this article.
Write to Eyk Henning at eyk.henning@wsj.com, Jacob Bunge at
jacob.bunge@wsj.com and Christopher Alessi at
christopher.alessi@wsj.com
(END) Dow Jones Newswires
July 14, 2016 16:02 ET (20:02 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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