Bayer Makes “Unsolicited” Bid to Acquire Monsanto in Deal Valued at More Than US$40 Billion
19 May 2016 --- Bayer, the German chemical and drug giant, has made an "unsolicited" approach to acquire US agribusiness Monsanto.
Bayer said the deal would "reinforce Bayer as a global innovation-driven life science company" but Monsanto said “there is no assurance" that a deal would be struck.
No financial details of the deal were disclosed but it is thought to be valued at more than US$40 billion, according to one report.
Shares in Monsanto were up nearly nine percent to US$98.38 after the deal was announced but shares in Bayer dropped nearly five percent to US$95.15.
The offer comes as the agriculture industry battles years of falling crop prices and amid a wave of consolidation in the sector.
The combination of the two companies would create the world's largest seed and crop company and could prompt further consolidation.
The proposed deal follows weeks of speculation that Monsanto, which has a market capitalization of around US$40 billion, could be an acquisition target for Bayer, which has a market capitalization of around US$90 billion.
Bringing together Bayer and Monsanto would form a company with a diverse portfolio making products such as Aspirin, Alka-Seltzer and crop genetics and a range of agricultural products.
It would mean that Bayer could tie-up its crop science franchise with Monsanto’s biotechnology and seed products, including its chemical spray Roundup.
According to Morgan Stanley, the combined entity would control around 28 percent of the world's pesticides and 36 percent of US corn seeds.
Bayer is the second biggest maker of crop chemicals behind the Swiss company Syngenta.
Monsanto, which is cutting its workforce amid falling profits, attempted to by Syngenta last year.
But Syngenta instead accepted a US$43 billion offer from Chinese state company ChemChina.
A further deal in the sector saw Du Pont tie-up with Dow Chemical in a mega merger.
The proposed deal between Bayer and Monsanto could prompt competition concerns due to the vast control it would have in the market.
It could be of particular concern for farmers, who have previously raised concerns that such merges could lead to higher prices and less choice for them.
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