Updated Tuesday, May 24, 3 p.m., to include Monsanto's rejection of Bayer offer - St. Louis-based crops and seeds specialist Monsanto has rejected a $62 billion offer from German drugs and chemicals company Bayer AG.
In a statement Tuesday, Monsanto called the takeover bid "incomplete and financially inadequate." However, the seed company is suggesting that a higher bid might be accepted, saying that it remains open to talks.
Monsanto Chairman and CEO Hugh Grant also said that the initial offer failed to address potential financing and regulatory risks. Bayer made an all-cash bid that valued Monsanto's stock at $122 each.
Our original story:
Bayer is making its case for buying St. Louis-based Monsanto. The German company is offering to acquire the seeds and agricultural chemical business for $62 billion. The deal could create the world’s leading company for crop protection and seeds and traits.
Bayer says it would continue to make St. Louis a vital location for any combined company. It would be the headquarters for the global seeds business and North American commercial operations. Other units would be based in Germany and San Francisco.
The company highlighted plans Monday during a conference call with reporters.
It anticipates $1.5 billion in synergies, but Chief Executive Werner Baumann says it’s too early to discuss specifics.
“This is a very solid assessment we've done. But it's an outside-in view. There is no specificity by any means that we would be able and willing to share at this point in time," said Baumann.
He also touched on several reasons why, from Bayer’s point-of-view, a deal for Monsanto makes sense: advancing innovation, boosting research and development, similar business models when dealing with regulations and the combination would be highly-profitable.
But Baumann says another key factor is feeding the world.
“By 2050, the world's population is expected to grow by an additional three-billion people,” says Baumann.
“This represents about six-times the population of Europe today. A significant productivity increase of 60-percent is required to feed the planet.”
Bayer also is not saying what units it would be willing to unload to ease any potential anti-trust concerns. Officials say they think the companies complement each other to a point where there should be very few hurdles.
The German company also points to its strong roots in the U.S., having been in the country for 150 years. That’s compared to roughly 115 for Monsanto, which was founded in St. Louis in 1901.
“We’ve actually got more employees than Monsanto in the U.S.,” says Liam Condon, who is a Bayer board member and heads the company’s crop science division.
“But due to the nature and the size of the transaction we think it would be important for us to touch base with all necessary regulatory authorities to make sure all their concerns are taken into account.”
Monsanto and Bayer know each other well.
There have been years of conversations between the companies. They are customers and suppliers for one another and have several collaborations.
“That is very, very typical in the industry,” says Baumann.
“During these discussions, there is always a question – what else could be done for the benefit of customers and of course for the benefit of the companies.”
Those talks led to a session in St. Louis May 10 with senior officials, including Baumann, Condon and Monsanto Chief Executive Officer Hugh Grant.
“We had actually a very good and constructive discussion,” says Baumann.
“Our delegation handed over our offer letter in a very amicable and friendly environment and we are waiting the Monsanto board of directors’ response.”
He also suggests that Monsanto was forced to admit last week that discussions were underway after comments from a senior executive.
Reuters quoted Monsanto President and Chief Operating Officer Brett Begemann saying any takeover interest was “wild speculation.”
