Bayer explores potential bid for Monsanto

Bayer, the €79 billion German chemicals and drugs company, is exploring a bid to buy US agribusiness Monsanto for more than $40 billion in what would be the latest consolidation of the world's providers of seeds and crop chemicals to farmers.

Bayer and its financial advisers have been studying for weeks how a combined company would be structured.

If a bid is launched for Monsanto, it would come nearly a year after the St Louis-based company's failed attempt to acquire another rival, Switzerland's Syngenta.

People involved in the process said that while Bayer was weighing an offer for Monsanto, it was concerned such a big combination would face a number of obstacles, including from competition and regulatory authorities.

“Trying to do this merger is like going sailing in a tsunami,” said David Balto, a Washington attorney and former justice department lawyer who has worked on behalf of farmers in the past. “This is going to raise real significant concerns at the justice department,” he said.

A potential bid would come as the agribusiness industry has seen a rapid succession of large-scale mergers and acquisitions, including Dow Chemical and DuPont's $130 billion merger in December.

The rapid-fire round of dealmaking was triggered by Monsanto’s unsuccessful attempt to buy Syngenta, which collapsed in August.

Hugh Grant, Monsanto's Scotland-born chief executive since 2003, has argued the US company needs to move beyond its reliance on the GMO business and provide an even more integrated offering to farmers that includes key chemicals.

It was unclear whether Monsanto and Bayer have held formal talks in recent weeks. But in recent months, Monsanto has held informal talks with Bayer and BASF about industry consolidation but no agreement was ever made on how they could best join forces.

Monsanto has made three attempts to buy Syngenta since 2011, which all failed and eventually drove the Swiss company to agree a $44 billion sale to ChemChina, a hitherto little known Chinese group that has been striking large outbound acquisitions.

Coupled with the Dow-Dupont merger, the deals have left Monsanto exposed and led Bayer and its German rival BASF to look at various scenarios for their agribusiness units.

– Copyright The Financial Times Limited 2016