Shares of Monsanto (MON) are rising 2.2% to $108.33 on heavy trading volume midday on Tuesday as the company rejected Bayer’s (BAYRY) $62 billion takeover offer, but said it is open to further deal talks.
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Responding to Monsanto’s Views on the Proposal, Bayer said it is confident that it can address any potential financing or regulatory matters related to the transaction.
Bayer’s offer values Monsanto at 15.8 times its 12-month earnings before interest, tax, depreciation and amortisation (EBITDA) as of February 29.
Late Tuesday Bayer issued a statement saying that it “looks forward to engaging in constructive discussions with Monsanto” while sticking to its offer.
Both the companies share similar vision and this merger can create an integrated business that is capable of generating substantial value for the shareholders, said Werner Baumann, CEO of Bayer AG.
“The disclosed price is at top end of the limit and just about works out”, said Markus Manns, who oversees nearly $300 million at Union Investment GmbH, including Bayer shares, according to Bloomberg.
Farmers have seen their incomes fall in the last few years amid declining commodity prices, and that’s spurred them to increasingly demand products tailored to their needs, according to Miner, one factor that’s spurring Bayer and Monsanto to consider a merger.
It also comes after chemical giants Dow Chemical and DuPont agreed to merge into a $130 billion behemoth, then split again into three companies.
A combination of the two businesses would create a giant seed and farm chemical company with a strong presence in the U.S., Europe and Asia.
ChemChina plans to buy Switzerland’s Syngenta for $43 billion, after Syngenta rejected a bid from Monsanto.
The kind of genetically modified seeds that Monsanto started to sell two decades ago now account for the majority of corn and soybeans grown in the United States.
The offer from Bayer, which was made May 10 in a letter to Monsanto, marks a reversal of roles for the US company. A tie-up between Bayer and Monsanto would leave Germany’s BASF as the only outlier going solo in the industry.
A follow up to share Monsanto’s public response to Bayer AG’s unsolicited proposal to acquire Monsanto for $122 per share in cash. The payment would be funded with a combination of debt and equity, with about $15.5 billion coming from selling shares to existing investors. For Monsanto, the deal will help reduce reliance on the agriculture sector, while for Bayer it will augment its seeds business. That compares with a closing price May 20 of $101.52 and is 37 percent higher than the closing price of $89.03 on May 9, the day before Bayer made a written proposal to Monsanto.
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Morgan Stanley & Co. and Ducera Partners are acting as financial advisors, and Wachtell, Lipton, Rosen & Katz is acting as legal advisor, to Monday.
