Coverage: Bayer boosts bid for Monsanto

German drug and chemical company Bayer AG upped its offer for American seed company Monsanto to $64 billion, putting pressure on the target to consider the deal.

Greg Roumeliotis and Karl Plume of Reuters had the news:

Analysts and some Monsanto shareholders were quick to opine that Bayer’s latest offer, the largest all-cash takeover bid on record, was unlikely to entice Monsanto. Bayer, however, is hoping that the sweetened offer will spur enough Monsanto shareholders to call on the company’s management to be more accommodative.

Global agrochemicals companies are racing to consolidate, partly in response to a drop in commodity prices that has hit farm incomes. Bayer made its bid for Monsanto public in May, but the two companies have made little progress since in negotiating a deal.

Monsanto Chief Executive Hugh Grant said last month that the company was in talks with Bayer and other companies in its sector about “alternative strategic options.” He did not name the other companies, but Reuters has previously reported that Monsanto had discussed a business combination with BASF SE.

Bayer said on Thursday that it had raised its offer to $125 a share from $122 in cash and offered Monsanto a $1.5 billion reverse antitrust breakup fee, “reaffirming its confidence in a successful closing.”

Nathan Bomey of USA Today reports that the market remains skeptical of the deal:

A combination of Bayer and St. Louis-based Bayer would create the world’s largest agricultural supplier.

But the market appears to remain skeptical that a deal will get done. Shares of Monsanto closed 3.06% higher Thursday at $104.22 — still 16.6% below the new offer price. Bayer shares closed up 0.6% to 93.44 euros before the new offer was publicly confirmed.

Monsanto CEO Hugh Grant has said openly that the company is reviewing alternative options, which Bloomberg reported Wednesday could include a deal with BASF’s agricultural division.

To assuage concerns over potential regulatory obstacles, Bayer said Thursday that it is now also offering a breakup fee of $1.5 billion if government officials block the acquisition. Bayer said it delivered the new offer verbally July 1 and officially July 9.

“Bayer has comprehensively addressed Monsanto’s questions concerning financing of the transaction,” the company said in a statement. “Bayer remains fully committed to pursuing this transaction.”

Eyk Henning, Jacob Bunge and Christopher Alessi of The Wall Street Journal note that a deal would reshape Bayer:

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.”