GMO giant Monsanto has rejected a $62bn (£43bn) offer from German pharmaceutical giant Bayer saying the price was too low.
Hugh Grant, Monsanto’s chief executive, said the offer was “financially inadequate”, leaving the door open for a potentially higher bid.
He said the proposal significantly undervalued the company but said they were open to engage further in negotiations
Monsanto can “see the logic” of combining with the German corporation, and believes the merger could get the required approval from regulators, sources familiar with the talks told Reuters. However, the St. Louis, Missouri-based company believes its shareholders deserve a better offer.
“The deal will allow Bayer to tap growing demand at a time when farmers must boost food productivity to feed an estimated 10 billion people worldwide by the year 2050,” RT America’s Ashlee Banks said, adding that Bayer CEO Werner Baumann hopes that this rationale will win over skeptical investors and overcome anti-GMO backlash.
Some Bayer shareholders were critical of the bid, saying the $122 per share was too high already. Monsanto’s shares rose to $107.61 on the New York Stock Exchange on Tuesday morning, short of Bayer’s valuation.
Meanwhile, Bayer’s shares rose by 3.23 percent, reaching 87.15 Euros at the Frankfurt exchange.
The German conglomerate now has to decide whether to raise the offer, walk away, or attempt a hostile takeover.
“If you look at Monsanto’s share price right now, it is still well short the $122 a share price Bayer has already offered, which was a premium of 37% to Monsanto’s pre-bid price,” Boom Bust’s Edward Harrison said. “And now Monsanto is telling Bayer it wants still more. Bayer are clearly overpaying here. And to the degree they would pay more, or agree to pay a breakup fee in the case a deal doesn’t happen, their shareholders are going to be very unhappy.”
If successful, the deal would eclipse the planned combination of the agricultural units of Dow Chemical and DuPont, and would also become the biggest-ever corporate buyout by a German company.