Bayer to get access to more data in its increased offer to Monsanto

Bayer AG's months long courtship of Monsanto Co. is shifting into high gear, with the U.S. seed maker sharing additional information with its German suitor ahead of a board meeting next week, when Bayer could raise its bid again, according to people familiar with the matter.

 

Bayer late Monday said it had lifted its offer for Monsanto to $127.50 a share, compared with a previous offer of $125 a share in July. Monday's bid values Monsanto at over $65 billion, including debt. Early Tuesday, Monsanto shares were up modestly, trading about 0.4% higher. 

 

The German drugs giant said the bid was contingent on a "negotiated transaction" and that it couldn't assure an agreement. Monsanto said ongoing discussions were "constructive," but also said it was evaluating other options, without detailing them. 

 

Still, the two sides appear closer to a deal than back in May, when Bayer launched its takeover bid with a $122 offer that Monsanto--fresh from its own unsuccessful pursuit of Swiss rival Syngenta SA--rejected. Since then, bumper harvests have hit many crop prices and squeezed farmers' budgets, hitting Monsanto's profit and share price. 

 

Monsanto, based in St. Louis, has been sharing information about its business with Bayer since at least July. One person familiar with the matter said Bayer made the new offer within the last 10 days to get access to more information about Monsanto's accounts. It is unclear if the new information-sharing rises to the level of a typical due-diligence process. 

 

Meanwhile, Bayer Chief Executive Werner Baumann is expected to brief the company's supervisory board at a Sept. 14 meeting, where he could ask for permission to further increase the offer, according to people familiar with the matter. Bayer hosts an investor presentation in Cologne on Sept. 19 and 20, and industry observers say executives are eager to have a deal wrapped up by then. 

 

A key factor is how much Bayer's board will be willing to add to its already significant debt load--a consideration that analysts have said may limit Mr. Baumann's ability to offer much more than $130 a share. The modest increase is "further indication that Bayer is feeling stretched" by the deal and won't raise its bid north of $130, according to analysts at Bernstein. 

 

Mr. Baumann, who took over the top job just week before launching the bid for Monsanto, faced pushback throughout the summer from some investors over shifting the company away from its lucrative pharmaceuticals division and further increasing its already high debt level. 

 

He contends the deal is in line with Bayer's overall life sciences strategy and would create value for both companies. Mr. Baumann's pursuit of Monsanto comes amid a flurry of mergers and acquisitions activity in the global agrochemical industry. 

 

Dow Chemical Co. and DuPont Co. last year announced a merger that the companies--together valued at roughly $103 billion--said would ultimately create one of the world's largest agrochemical firms. 

 

Earlier this year, Chinese state-owned China National Chemical Corp. announced a $43 billion cash deal to acquire Syngenta AG, after a failed attempt by Monsanto to take over the Swiss agrochemicals group. 

 

Other operators in the industry are also watching closely. 

 

On Tuesday, Bayer's German competitor BASF SE said it was closely monitoring antitrust concerns over planned tie-ups in the global agrochemical industry for potential acquisitions.

 

"We are looking at antitrust issues to see if we can help," Markus Heldt, president of BASF's agricultural division, said, referring to ongoing mergers and acquisition plans in the sector. Competition authorities could require companies to sell some assets to win approval for their deals. 

 

Consolidation in the industry has been driven by pressure on agribusiness companies to slash costs and build scale as farmers grapple with a three-year slide in crop prices that has forced makers of seeds, crop chemicals, fertilizers and tractors to cut prices and lay off staff.