Bayer AG, the German-based chemicals and pharmaceutical company, confirmed this morning that it has recently held preliminary discussions to acquire Monsanto, the world’s largest seed maker currently valued at $42 billion (£28.8 billion).
Missouri-based Monsanto also later confirmed it had received a bid from Bayer and that its Board of Directors were currently reviewing the proposal. Neither party, however, disclosed the size of the proposed takeover.
Monsanto currently remains one of the last independent global seeds and chemical producer.
However, recently it has endured tough trading period. Its shares have dropped 19 per cent over the past 12 months as low crop prices weigh on demand for its seed and chemical products. Sales of corn and soybeans seeds fell 8.6 per cent and 11 per cent year on year respectively in the three months ending in February.
A deal with Bayer would help diversify Monsanto’s heavy exposure to the agricultural industry.
Although no takeover price has been mentioned, market analysts anticipate Bayer would have to pay a steep premium to acquire Monsanto, such that it could become the highest recording deal in the crop chemicals industry. Surpassing ChemChina’s $43 bn (£29.5 bn) takeover of Syngenta earlier in February this year.
However, the tie up has not been confirmed as a ’done deal’. There remain potential obstacles the proposed merger would face given antitrust laws and food security laws in the US.
As that the merger would create a globally dominant player in the seeds and chemical industry, particularly in soybeans and corn, which are both critical industries in the US.