After having been turned down in May, the German pharmaceutical behemoth Bayer AG took another shot at acquiring U.S.-based seed and pesticide producer Monsanto. Bayer told Monsanto that it would buy all its assets and debt for $62 billion.
In May, Monsanto rejected the offer for being too low. But this month, Bayer made another try arguing that it would take care of all legal hurdles that may hinder the colossal agricultural tie-up.
Bayer also requested access to due diligence information, but Monsanto said that this won’t happen until the German company raises its bid. Monsanto also said, that other than money, it needs a guarantee that there aren’t any major regulatory obstacles to the agreement.
The agricultural giant’s shares slipped 2 percent Friday after investors learned about the stalling negotiations but they managed to close to $109.20.
Bayer seeks to purchase Monsanto and form the world’s largest producer of genetically modified seeds and pesticides. Monsanto unveiled a similar plan when it tried to buy its Switzerland-based competitor Syngenta but failed.
Shortly after the failed negotiations, Monsanto agreed to get to the negotiating table with Bayer, but it didn’t disclose any terms of the deal it sought.
If they manage to merge, the two companies hope for a consolidation on the agricultural market. Monsanto has a leading position as seed supplier while Bayer has its own successful line of pesticides but farmers don’t use its products on all their crops.
Competitors are also looking for mergers. For example, there is a Dow Chemical- DuPont deal in the making and Syrigenta has plans to sell the business to the Chinese for $43 billion.
Bayer reportedly has collected $60 billion for the Monsanto deal from several banks. Plus, the U.S. seed giant has piled up an $8 billion debt.
On the other hand, not everyone inside Bayer are happy with the acquisition. Its shares slipped on the European stock market to €100 ahead of the announcement of the bid. People familiar with the matter believe that some shareholders reject the acquisition altogether or believe that it is too expensive.
Other people are concerned that the combination may turn Bayer into a health care-agricultural abomination, which could prove bad for both business. Agricultural giants are often at the mercy of crop price swings, analysts explained.
The chief of the Bayer agricultural unit Liam Condon noted that the immediate response to the acquisition was a “shit storm.” But some shareholders are confident that there are some long-term benefits of the merger.
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