Bayer in talks to buy GM food company Monsanto

German pharmaceuticals giant has approached world’s biggest seed company about ‘negotiated acquisition’ likely to be worth more than $40bn

The German drugs and chemicals group Bayer has pounced on Monsanto, the world’s biggest seed company, with an unsolicited takeover offer likely to be worth more than $40bn (£27bn).

Bayer, which invented aspirin in the 19th century, said executives from both companies had met to “privately discuss a negotiated acquisition of Monsanto Company” to create a “leading integrated agriculture business”.

Combining the companies’ operations would create a giant business making drugs such as Yasmin birth control pills, pesticides and seeds for genetically modified crops.

Monsanto confirmed an unsolicited takeover proposal from Bayer and said its board was reviewing the offer with its financial and legal advisers.

Monsanto, based in St Louis, Missouri, has a market value of $42bn. Last year, the company failed in an attempt to buy the Swiss pesticides firm Syngenta for $47bn and has since itself become a takeover target, with global crop prices falling. The German chemicals company BASF is also known to be interested.

Prof John Colley of Warwick Business School said: “Monsanto certainly do not want to be bought by a European business. However, shareholders always have their price. No doubt Monsanto will reject the bid, but it will need to convince its shareholders that it has seriously considered the offer. A higher bid is likely.

“Demand is poor for agribusiness products currently due to low commodity prices. Overcapacity has led to poor performance and lower share prices, in turn providing opportunities for mergers.”

Syngenta agreed to be bought by the state-backed China National Chemical Corporation in February. The $43bn deal – the largest foreign acquisition ever by a Chinese company – is being scrutinised by US regulators amid concerns about the security of the US food supply.

A deal between Bayer and Monsanto could also raise antitrust concerns in the US because there is overlap between their seeds businesses, particularly soybeans, cotton and canola.

Monsanto is thought to have approached Bayer earlier this year about buying or forming a joint venture for its crop science division.

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