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Bayer offers to buy Monsanto for $62 billion

German pharma giant Bayer has offered to pay as much as $62 billion in cash, including debt, to acquire American seeds company Monsanto. It would be biggest foreign takeover by a German firm if Bayer's proposal is accepted.

Bayer offers to buy Monsanto for $62 billion

The acquisition would create the world's largest farm supplier eclipsing a planned combination of Dow Chemical and DuPont's agriculture units. The offer comes just three weeks after Werner Baumann became the CEO of Bayer. But the bid has been termed as "arrogant empire-building" by a major shareholder.

The offer of $122 per share represents a 37 percent premium to share price of Monsanto before the reports of acquistion. "We fully expect a positive answer of the Monsanto board of directors," Baumann told reporters on a conference call on Monday, describing criticism from investors as "an uneducated reaction in the media", driven by an element of surprise.

Monsanto had confirmed last week that it had received an offer from Bayer but the company preferred not to divulge more details.

It is to be noted that German chemicals group BASF has also been trying to enter into an agreement with Monsanto but is seen as unlikely to counter bid.

Bayer's shares had already fallen 14 percent since rumors of a bid emerged last week. The shares plunged 3.6 percent on Monday to a new 2-1/2 year low of 86.3 euros. Bayer's offer values Monsanto at 15.8 times its earnings before interest, tax, depreciation and amortization for the year ended Feb. 29.

Markus Manns, a fund manager at Union Investment, Bayer's 14th biggest investor, said a deal made sense but the price is not right. "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," he said.