Please ensure Javascript is enabled for purposes of website accessibility

Instant Analysis: Monsanto Rejects Bayer's Buyout Offer

By Eric Volkman - May 26, 2016 at 4:12PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The German company's initial bid for the agribusiness giant is met with a firm "no."

What happened?

Bayer's (BAYR.Y 0.58%) pursuit of American agribusiness peer Monsanto (MON) has hit an early roadblock. The latter company formally rejected the former's initial all-cash, $122-per-share bid to purchase it.

SOURCE: MONSANTO.

In the press release announcing its decision, Monsanto quoted its CEO, Hugh Grant, as saying that Bayer's offer "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." The company did not elaborate further.

But Monsanto clearly left the door open for another, presumably higher bid. It hastened to say that it is "open to continued and constructive conversations to assess whether a transaction in the best interest of Monsanto shareowners can be achieved."

Does it matter?

Bayer was happy to hear those words. In response, it fired off a press release stating that it "looks forward to engaging in constructive discussions with Monsanto regarding the proposed transaction."

Of course it does. Owning Monsanto would make Bayer a global agribusiness powerhouse by combining the American company's very strong position in that market with its own operations.

But as badly as management might want a tie-up, it's clear that shareholders are already uneasy with the potential cost. Several were cited by The Wall Street Journal as considering the expense of the opening bid a "stretch." Bayer's shares have traded down over 12% since the company's interest was first made public two weeks ago.

At this early stage, the Bayer/Monsanto takeover story is starting to look eerily like the most recent monster agribusiness acquisition play. Ironically, Monsanto was the pursuer in that case and a European company the prey, specifically Syngenta (NYSE: SYT). In spite of a fairly generous offer, Syngenta not only initially turned down Monsanto, it also rejected subsequent overtures. Ultimately, Monsanto halted its pursuit, and Syngenta found another potential parent, ChemChina.

Bayer does seem determined to win Monsanto's hand in marriage; the questions are if it's willing to fatten the bid sufficiently and whether its shareholders will accept the added expense. Monsanto's stock price -- and its future -- will depend on the answers. We're likely only at the beginning of this saga, so stay tuned for more developments.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Monsanto Company Stock Quote
Monsanto Company
MON
Bayer Stock Quote
Bayer
BAYR.Y
$15.70 (0.58%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
332%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.