Monsanto rejects Bayer’s “financially inadequate” $62bn takeover offer
US seed company Monsanto has rejected Bayer’s $62bn (£42bn) takeover offer.
On Tuesday, Monsanto described the German firm's bid as "incomplete and financially inadequate".
Monsanto's shares grew by around three per cent to $108.99 on the news. After Bayer made its formal offer, Monsanto's shares rose by more than four per cent on last week's value.
Read more: Bayer's Monsanto bid: Are European firms about to take over the world?
[charts-share-price id="277"]
Monsanto’s board said it was “open to continued and constructive conversations” to see whether a better deal for its shareholders can be agreed.
“We believe in the substantial benefits an integrated strategy could provide to growers and broader society, and we have long respected Bayer’s business,” said Hugh Grant, Monsanto chairman and chief executive.
“However, the current proposal significantly undervalues our company and also does not adequately address or provide reassurance for some of the potential financing and regulatory execution risks related to the acquisition.”
Andrea Williams, a fund manager at Bayer shareholder Royal London Asset Management (RLAM), told City PM she would expect the German company to increase its offer from $122 per share to $135 per share, funded by disposals of other parts of its business.
Williams said RLAM was “frustrated” and “somewhat surprised” by the deal, with it expecting Bayer’s next move would be into pharmaceuticals.
"We're somewhat surprised also that they're doing it now,” she said. “Maybe they feel the industry is consolidating around them and the last big potential deal has to be done.
“But when I speak to people about Monsanto and I speak to analysts about Monsanto they seem to be quite concerned about the earnings profile and some of the key products and suggest that they've had a number of warnings and more are to come.
“So you think, well, why not wait if that’s the case? If Monsanto's earnings are coming down maybe you can get it at a lower price in a few months' time.”
Read more: Shares in this controversial seed giant have jumped on takeover interest
Some other Bayer shareholders are likely to be unhappy about the latest development in the deal.
Reacting to the $62bn offer yesterday, Markus Manns, a fund manager at Bayer shareholder Union Investment, said: “The price that has now been disclosed is at the upper limit and it is just about economical. Should it rise further, which is to be assumed, the takeover will become increasingly unattractive.”
And when Bayer revealed last week that it was interested in making a takeover bid, John Bennett of Henderson Global Investments told Reuters the move would represent “arrogant empire-building”.