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 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.

Bayer is still seeking more information on Monsanto's future sales prospects and could raise its offer further if it succeeds, according to a person familiar with the matter.

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 rough 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 settled 3.1% higher at $104.22 on Thursday, 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 Chief Executive 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 Chief Executive 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. Mr. Dekkers 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 the move was strongly opposed by Mr. Dekkers, people familiar with the matter have said.

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 15, 2016 02:48 ET (06:48 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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