Bayer has just raised the amount its willing to pay for a Monsanto share, in an attempt to sweeten the deal. The two corporate giants have been negotiating this transaction since May.
Bayer increased its offer by 50 cents per share, from $125 to $125.50. This is in turn has raised Monsanto’s total value to around $65 billion.
Monsanto officials have stated that increase is “lucrative”. However, the company is not ready to seal the deal yet. Monsanto officials want to continue negotiations.
Bayer executives have said that if they manage to acquire Monsanto, the largest seed producer in the world, with their combined expertise, they will be able to help farmers all around the world.
Werner Baumann is the newly instated chief executive of Bayer. After a few weeks in this new position, started his attempt to buyout the largest crop seed provider in the world.
Some Bayer shareholders have voiced some concerns regarding this endeavor. They believe Baumann is starting to lose focus. Shareholders believe Bayer should continue supporting its pharmaceuticals division.
If Baumann succeeds in acquiring Monsanto, this would be the largest acquisition done by a German company in history.
Both Bayer and Monsanto Could Profit From The Deal
Monsanto officials stated that they see the value in combining their expertise on seeds with Bayer’s vast portfolio on pesticides. But the board of directors of the seed giant unanimously rejected Bayer’s first offer. They claimed $125 per share was not nearly enough. Financial analysts estimate that around $135 would be a more appropriate sum.
On Monday, Bayer said that the deal is not guaranteed. And even if the deal would go through, it would still have to go through a round of regulatory approvals.
Monsanto is carefully considering Bayer’s offer. Their financial state has taken a blow in recent years. Farm economy is faced with some rough times. Large crops have pushed the price of grain down. US farmers are trying to cut down expense on everything, from land, to equipment. The US Department of Agriculture claim this year the farming industry will hit a new low. It’s the worst one since 2009. As such, both Bayer and Monsanto’s revenues will suffer, since farmers will probably cut back on both pesticides and seeds.
In response to this slump, Monsanto has already fired about 16% of their workforce. They have also reduced funding for some of their projects.
In spite of this, Monsanto is still skeptical about Bayer’s offer. They believe the company is worth much more not just for the revenue they have now, but for what the company is going to be worth in the future. They have a number of projects that are going to pay off later on, including an analytics program that can offer farmers advice based on soil, weather and crop stats.
Earlier this year, DuPont and Dow Chemical have also merged, which leaves both Bayer and Monsanto with few partners. Both DuPont and Dow Chemical have division which focus on seeds and pesticides. The merger spawned three independent companies, one of which focuses on agriculture.
Another seed and pesticide company, Syngenta will sell its shares to China National Chemical Corp for approximately $43 billion dollars. This will be real boost to China’s recent attempts to modernize its agricultural sector.
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