The share price of German drugs and chemical giant Bayer has been virtually untouched after Monsanto rejected its improved takeover offer.
And shareholders appear to have mixed views on the company’s pursuit of the US seeds company.
Last week, Bayer improved its offer for Monsanto from $122 (£93) per share to $125, equalling around $64bn. The Monsanto board rejected the offer on Tuesday, describing it as “financially inadequate and insufficient”.
Andrea Williams, a senior fund manager at Bayer shareholder Royal London Asset Management, told City A.M. she believes the company is “determined to complete the deal” and would be happy for another $10 per share to be added to the price.
“Although they have rejected the deal I think the tone has slightly changed in that they seem more willing to engage in discussions and have appointed advisors to help,” said Williams, reacting to Monsanto’s latest rejection.
“It is now up to Bayer to approach Monsanto shareholders to convince them about the merits of the deal. The peak of the share price was $147 in 2008 and then more recently $127 in 2014 and the company has had a number of profit warnings since then.”
She added: “As a Bayer shareholder [I am] happy for them to go to $130-135 for Monsanto but do not see the need to go higher than $135… I think they are determined to complete the deal.”
Markus Manns, portfolio manager at Union Investment, a Bayer shareholder, also suggested $135 per share would be acceptable.
“A takeover of Monsanto by Bayer would make sense strategically,” he said.
“The offer which had been increased to $125 per share on Friday was in line with financial capacities. After Monsanto’s refusal, the question is if Bayer will increase its offer again or will address the Monsanto shareholders directly.
“In our view, $135 per share would be the limit, as Bayer would not be able to pay more without running financial risks.”
He welcomed the fact that the chief executive of Bayer has “made clear that they are going to respect financial discipline”.
Manns added: “Basically, a third offer is possible, but it could make more sense to address the Monsanto shareholders directly in order to put pressure on the management to open the books. A completely hostile takeover without previous due diligence might probably be too risky.”
Their openness to the deal being improved contrasts with the view of fellow London-based fund management group Henderson. It is understood to have reduced its stake in Bayer since May, when the first offer was made.
“For us, the strength of Bayer as a long-term investment has been called into question by its potential takeover of Monsanto,” said Rahman, in a letter to Bayer sent in June but published yesterday, before the Monsanto rejection.
Bayer’s share price touched €110 in April but tumbled to around €84 after the first offer was made in May. It is currently at around the €92 mark.
In contrast, Monsanto’s share price was as low as $86 in April, peaked at more than $112 in May and is now sitting at $107.