It seems Monsanto (NYSE: MON) might become absorbed by Germany-based multinational Bayer sooner rather than later. According to a Bloomberg report, citing “people familiar with the matter,” negotiations between the two companies have been successful enough that the pair might have a merger deal in place within two weeks.
According to the article, Monsanto and Bayer have found common ground on a number of points, including a purchase price and the size of the termination fee Bayer will pay if the acquisition is not concluded.
The European company initially offered $122 per share, or around $62 billion, for Monsanto in May, but was turned away. It eventually raised its bid to $125 per share ($65 billion). That too was rejected by the target company as being “financially inadequate and insufficient to ensure deal certainty.”
If Bloomberg’s report proves accurate, and the negotiations are rapidly approaching a positive conclusion, the tie-up of the two companies would result in the creation of the world’s No. 1 producer of seeds and pesticides.
This outcome would be in sharp contrast to the other recent, high-level potential deal Monsanto was involved in. The agriculture giant made several overtures to Switzerland-based Syngenta last year, but after the target rejected a sweetened $46 billion offer, the American company dropped its pursuit. Not long after that, Syngenta struck a deal to be acquired by ChemChina for $43 billion.
The report on the Bayer negotiations should be encouraging for Monsanto investors hoping for a quick and lucrative payout — the stock most recently closed at just over $107 per share. But it should be noted that not only has it not been officially confirmed, any potential deal will likely face heavy regulatory scrutiny. As such, it’s quite possible that the terms, price, and/or composition of a post-merger entity could see modifications in order to assuage regulators’ antitrust concerns.
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Eric Volkman has no position in any stocks mentioned.