Will Bayer Take Over Monsanto with Hostility?

May 25, 2016

By Jan

In a remarkable case of predator becoming prey, Monsanto is being discussed as a target as Bayer just offered $62 billion to take over the company. But Monsanto rejected and said the bid is “incomplete and financially inadequate,” but left the door open to further negotiations.

Monsanto Chairman and CEO Hugh Grant further said: “However, the current proposal significantly undervalues our company and also does not adequately address or provide reassurance for some of the potential financing and regulatory execution risks related to the acquisition.”

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This statement signals that Monsanto is open to further talks with Bayer, but it wants more money and better terms before it accepts a deal. Bayer responded that its $122 per share offer represented “full and certain value” for Monsanto shareholders, but that it looks forward to engaging in constructive discussions with Monsanto.

Bayer Chief Executive Officer Werner Baumann said in a statement: “We are confident that we can address any potential financing or regulatory matters related to the transaction. Bayer remains committed to working together to complete this mutually compelling transaction.”.

The rejection came as little surprise to analysts and investors. Bayer’s unsolicited bid for Monsanto is already the largest all-cash takeover on record, according to Thomson Reuters data, so now Bayer has to decide whether to raise the offer, walk away, or attempt a hostile takeover. 

The downside for Bayer management is that Monsanto may also be signaling to counter-bidders to step up. Monsanto is also looking for protections from the risk of regulators blocking the deal.

Manning & Napier Advisors, an investment management firm that is Monsanto’s 14th largest shareholder according to Thomson Reuters data, agreed with Monsanto’s decision to seek a higher offer.

“Monsanto’s assessment that the initial offer was inadequate is valid, as we believe it does not appropriately value the company’s existing product portfolio,” said Michael Knolla, a managing director at Manning & Napier.

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