Will Bayer Buy Monsanto In Biggest Cash Buyout in History?

Monsanto may be known as the controversial maker of genetically modified seeds but their name may no longer be on the tips of tongues as pharmaceutical giant Bayer has raised its offer to buy the seed and pesticide firm, to $65 million.

This would make it the largest cash takeover in history. Bayer values Monsanto shares at $125 each, and should the deal go through, share value could improve to $127.50.

Monsanto acknowledges that this offer is, indeed, more attractive and they have noted that the discussions with Bayer are “constructive.”

Officials for the company, in fact, have said, “Monsanto is continuing these conversations as it evaluates this proposal, as well as proposals from other parties and other strategic alternatives to enable its Board of Directors to determine if a transaction in the best interests of its shareowners can be realized.”

Executives at Bayer also say that acquiring Monsanto—the largest supplier of crop seeds and genes in the world—will create a global firm with an impressive portfolio in pesticides that is better positioned to assist farmers across the globe to produce more food for a growing and more affluent population.

While the two companies are quick to discuss the benefits of the merger, there are, in fact, significant risks, as discussed by Jupiter Global Equity Income Funds Bayer shareholder Greg Herbert. Questioning the logic behind the joint venture, Herbert reported, “The company will be left with a highly geared balance sheet and the management effort to integrate the two businesses could easily lead to the larger pharmaceutical business being neglected.”

Indeed, experts warn that the combined business could also fall afoul of competition regulators. Their conditions might actually devalue the deal. You see, combining the two companies would result in the largest agricultural supplier in the world, a market leader in both Europe and the United States, as well as Asia.

Other major players in this sector have been merging and farmers continue to express great concern that they face fewer options and higher prices. And their concern is very real.

In 1996 there were upwards of 600 independent seed companies. Most, however, have been bought out by the bigger players in the game—including the six companies (Bayer, Dow Chemical, DuPont, BASF, Monsanto, and Syngenta) that now have control of 63 percent of the global seed market.

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