Bayer may increase its bid for Monsanto

Bayer is examining Monsanto’s financial accounts, sources said, a crucial step that could pave the way for the German company to raise its $55bn (€49bn) takeover offer for the US agrochemicals giant.

Bayer has signed confidentiality agreements to conduct due diligence on Monsanto, a process that is expected to last a few more weeks, as it weighs the size and timing of a new bid, the sources said, adding no final decision on whether to improve the offer has been made.

Representatives for Leverkusen, Germany-based Bayer, and St Louis-based Monsanto declined to comment.

Shares of Monsanto, which has a market value of $46.6bn, rose 2.1% in New York trading at one stage.

Bayer declined 42c to close at €93.95 in Frankfurt trading yesterday, valuing the company at $86.5bn.

Monsanto in July rejected Bayer’s improved $125-a-share offer, describing it as “financially inadequate” and leaving the German firm to decide whether to raise its bid a second time.

While Monsanto at the time said it remained open to “continued and constructive conversations,” it didn’t say whether it would allow due diligence, a request that Bayer previously set as a prerequisite to increasing its offer.

The German company is focused on reaching a friendly agreement though it hasn’t ruled out the option of going directly to Monsanto’s shareholders, the sources said.

Buying Monsanto would give Bayer the largest seed supplier and a pioneer of crop biotechnology, and create the world’s largest producer of seeds and pesticides.

The kind of genetically-modified seeds Monsanto started to commercialise two decades ago now account for the majority of corn and soybeans grown in the US.

Monsanto also sells seeds in foreign markets including Latin America and India.