Exclusive - Monsanto in talks with Bayer over confidentiality pact: source

By Greg Roumeliotis

(Reuters) - U.S. seeds company Monsanto Co is negotiating the terms of a confidentiality agreement with Bayer AG that would allow extensive due diligence, after the German drug and crop chemical group raised its acquisition bid to more than $64 billion, a source familiar with the matter said on Monday.

While there is no certainty the latest talks between the two companies will result in a confidentiality pact, let alone in any deal, the move indicates that Bayer's latest offer may at least help the negotiations make progress.

Bayer said last week it had sweetened its acquisition offer for Monsanto to $125 per share in cash from $122 per share and offered it a $1.5 billion reverse antitrust breakup fee.

 

Monsanto would still require Bayer to raise its offer further in order to agree to a sale, the source said. The source asked not to be identified because the negotiations are confidential. Bayer and Monsanto declined to comment.

Monsanto shares jumped percent to $106.61 on the news. Bayer shares had previously ended trading in Frankfurt down 1.4 percent to 92.67 euros ($102.62).

Access to confidential information has been a major sticking point in Bayer's negotiations with Monsanto ever since the Leverkusen, Germany-based company first offered to acquire its smaller St. Louis, Missouri-based peer in May.

Monsanto Chief Executive Hugh Grant said last month that his company was in talks with Bayer and other companies in its sector about "alternative strategic options." He did not name the other companies, but Reuters has previously reported that Monsanto had discussed a business combination with BASF SE .

Bayer argued last week that it had comprehensively addressed Monsanto's questions about financing and regulatory matters and said it was prepared to make certain commitments to regulators, if required, to complete a deal.

Monsanto responded by noting that its board would review Bayer's latest proposal, in consultation with its financial and legal advisers.

The seeds and agrochemicals industry, long dominated by six large companies, has been jolted by several large deals in the past year as low crop prices and belt-tightening by farmers pressured earnings.

Syngenta AG , which Monsanto tried to buy last year, agreed in February to be acquired by ChemChina for $43 billion, while Dow Chemical and DuPont DD.N struck a $130 billion megamerger last year. ChemChina and Syngenta however are still waiting for the U.S. to clear their deal based on any national security concerns.

Bayer's relatively modest price increase in its offer last week also reflected the view that Monsanto's recent poor earnings have weighed on its valuation.

Monsanto said last month its net income tumbled more than 37 percent to $717 million in the quarter ended on May 31. It cited a global glut of generic glyphosate, the active ingredient in its Roundup herbicide, and delays in securing European Union import approval for its next-generation biotech soybeans.

(Reporting by Greg Roumeliotis in New York; Editing by Tom Brown and Andrew Hay)