Monsanto rejects Bayer's $62bn bid

May 25, 2016, 12:11 PM EDT
(Source: Mike Mozart/flickr)
(Source: Mike Mozart/flickr)

Monsanto rejected Bayer's unsolicited $62 billion bid as "incomplete and financially inadequate."

Reuters reports:

Monsanto shares ended trading up 3.1 percent at $109.3 in New York, substantially below Bayer's bid price, underscoring some investor skepticism that a deal can be done. Bayer shares rose 3.23 percent at 87.15 euros in Frankfurt. "We believe in the substantial benefits an integrated strategy could provide to growers and broader society, and we have long respected Bayer’s business," Monsanto Chief Executive Hugh Grant said in a statement. "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," he added. Bayer responded that its $122 per share offer represents "full and certain value" for Monsanto shareholders, but that it looks forward to engaging in constructive discussions with Monsanto.

The Wall Street Journal writes:

Declining prices for major crops over the past three years have built pressure on the global companies that sell fertilizer, seeds and tractors to farmers, who have seen their incomes dwindle alongside grain prices. The U.S. Department of Agriculture has projected that U.S. farm incomes this year will fall to their lowest level since 2002. “The critical thing here is that Monsanto’s not in a distressed situation,” said Joel Ray,director of research with Davenport Capital Management LLC, which owns Monsanto shares. “You’re currently at the bottom of the ag cycle, and the net result is that valuations are depressed because of that.” Monsanto executives have touted the company’s pipeline of new seeds and crop sprays, and so far have maintained a target of doubling 2014 earnings per share by 2019, despite the downturn in the agricultural sector. “There’s no doubt that fiscal year 2016 is challenging, but we will emerge as a leaner, stronger organization,” said Brett Begemann,Monsanto’s president, last week at an investor event.