Bayer, a German multinational pharmaceutical and chemical company, has raised its offer to acquire Monsanto Company.
Talks regarding the acquisition have been going on since May this year. Initially, Bayer offered to purchase the American agricultural biotechnology and agrochemical firm for $122 per share but the offer was rejected as the U.S. company said it was financially inadequate.
In July this year, Bayer increased the offer to $125 each share; however, Monsanto did not agree to the valuation.
Now the German company has made yet another attempt and has offered $127.50 per share in cash, which brings the acquisition amount to $65 billion. Monsanto has confirmed that it has received the updated offer from Bayer.
"Monsanto is continuing these conversations as it evaluates this proposal, as well as proposals from other parties and other strategic alternatives to enable its Board of Directors to determine if a transaction in the best interests of its shareowners can be realized," says Monsanto.
The deal would be very significant as the new entity will become the world's biggest agricultural supplier and become the market leader in the U.S., Asia, and Europe. Bayer's farm business produces chemicals as well as seeds to combat insects and seeds. However, the company is more known for its healthcare products such as Aspirin.
Bayer has revealed that there is no certainty that the deal will be accepted by Monsanto. Some analysts suggest that share valuation of over $130 a share is a realistic price at which Monsanto may accept the deal.
"We still expect a bid per share in the $130-135 range before Monsanto comes to the table. As such, we continue see the Bayer shares remaining under pressure as the negotiations continue," says analysts from Baader Helvea.
Although Bayer wants to acquire Monsanto, all Bayer shareholders are not happy with the planned acquisition. Some shareholders believe that Bayer wants exposure in the agricultural sector at the expense of the company's pharmaceutical business.
"We knew that Bayer would have to bid higher and this offer is probably getting closer to succeeding, but it doesn't change our view that it presents significant risks to shareholders," says Greg Herbert, co-manager of the Jupiter Global Equity Income Fund.
Herbert added that the acquisition may result in the company to focus resources in the newly acquired business, which may affect Bayer's pharmaceutical business.
Some experts believe that Bayer should use the money to buy back its own share rather than purchasing Monsanto.
Only time will tell if Monsanto will accept the latest offer from Bayer.
Photo: Sebastian Rittau | Flickr