Analysts plant seeds of regulatory doubt over Bayer’s proposed $62bn takeover on Monsanto
Bayer’s proposed $62bn (£42.7bn) takeover of US seeds company Monsanto could be prevented by regulation, analysts have warned.
The German drugs and chemicals giant confirmed it had made a formal cash offer for the US company, known for its GM seeds, this morning.
The offer marks the biggest M&A deal announced globally this year and would also be Germany’s biggest outbound deal on record.
Read more: Bayer's share price falls on $62bn bid for Monsanto
But analysts have planted seeds of doubt over whether the deal could pass regulatory hurdles.
Jasper Lawler, a market analyst at CMC Markets, said in a note: “Germany’s BASF is really the only potential buyer but the bigger source of disruption is likely from regulators as well as Bayer’s own conservative German shareholders.
“The current Washington administration has been pretty hostile to big M&A of late and judging by the rhetoric from the Trump and Clinton campaigns there’s little chance of that abating.
“The main competition concern in the US would be over the merged company’s unrivalled control over farmer supply chains from Bayer’s weed killers to Monsanto’s GM seeds.”
Standard and Poor’s also noted this morning that “regulatory hurdles may throw a spanner in the works considering its bargaining power as a supplier may rise substantially as a result of the M&A”.
Meanwhile, the deal has also caused upset among some Bayer shareholders.
When Bayer revealed last week that it was interested in making a takeover bid, John Bennett of Henderson Global Investments told Reuters the move would represent “arrogant empire-building”.
Reacting to the $62bn offer today, Markus Manns, a fund manager at Bayer shareholder Union Investment, said: “The price that has now been disclosed is at the upper limit and it is just about economical. Should it rise further, which is to be assumed, the takeover will become increasingly unattractive.”
Read more: Shares in this controversial seed giant have jumped on takeover interest
This year has so far seen a drop in global M&A activity after a record 2015 in which more than $5 trillion of deals were announced.
MergerMarket's Kirsty Wilson told Morning Wire: “Cross-border M&A is dominating the highest valued deals so far this year, and Bayer/Monsanto is the latest example. Companies are willing to pay larger sums overseas to expand and consolidate, rather than deals at home.”
With today’s activity included, 14,567 deals have been announced across the world and recorded by Dealogic so far this year. This is the lowest year-to-date level seen in every year since 2010.
But the total value of these deals now totals, $1.26bn – still behind the levels seen in 2015 and 2014 to this date, but ahead of every other year since 2010.
As well as the level of announced deals falling, 2016 has been a record for collapsed transactions in the US.