The trend of enormous mergers in the agricultural market, especially in the industry that provides pesticides and genetically modified seeds, continues.
After Dow Chemical and DuPont planned a $130 billion merger and China National Chemical offered to buy Syngenta of Switzerland, now German chemical concern Bayer has made a $62 billion offer to buy Monsanto (MON) .
All these possible mergers and acquisitions have hit bumps, including the deal between Dow Chemical and DuPont, while officials are closely monitoring the acquisition of Syngenta.
So what about Monsanto?
On May 10, Bayer made clear to Monsanto that it is ready to purchase all its issued and outstanding common shares for $122 apiece. This implies a premium of 37% to the closing price on May 9 and 33% to the average share price of Monsanto in the past six months.
After the deal was announced Monday, Monsanto shares jumped 4.41%, closing at $106 a share. However, that was below $112, the level of Bayer's all-cash offer, showing that investors aren't necessarily on board.
There are reasons that investors are skeptical, including the fact that U.S. regulators traditionally tend not to approve huge mergers because of antitrust concerns.
"There seems to be some real skepticism over the deal, likely due to the increased scrutiny recent mergers have received," Chris Shaw, an analyst at Monness Crespi Hardt, told Bloomberg.
Jim Cramer, of TheStreet.com, said that the two companies "are way too confident. They don't know this Justice Department ... This is the most active antitrust department," adding that "this is a Justice Department that is very inclined to veto whatever is most squawked about."
U.S. senators have already showed their concern and interest in monitoring the deal and promised to take responsibility in order to protect consumers.
Sen. Mike Lee (R-Utah) and chairman of the Senate's subcommittee on antitrust, said Monday that the "The accelerating trend of consolidation in the agricultural space should be of deep concern to American consumers, touching as it does on the competitiveness of the industry that provides most of our nation's food."
Another concern is about Bayer's bid, which, according to rumors, is considered by Monsanto to be too low.
And Bayer shareholders are concerned that the company may be forced to increase its bid and overpay. Bayer's shares closed 4.71% lower on Monday as a result, falling to $95.48, the lowest level since January 2012.
But Bayer's management knows about regulators' rigorousness and doesn't expect any obstacles.
Moreover, Bayer already has plans to change Monsanto's name because of its negative image. The company has been controversial, with many protests and boycotts against its genetically modified products.
"It is too early to speculate about what the name of the company is going to be," Bayer Chief Executive Werner Baumann said in an interview with Bloomberg. "But let me tell you that Bayer's name and Bayer's reputation stand for science, innovation and an utmost level of responsibility for societal needs, and that is what we are going to leverage on, also for the combined company going forward."
Even if the situation seems confusing, investors want to be sure that Monsanto has long-term potential, with or without a merger.
Because Monsanto expects considerable growth between 2020 and 2025 and also considers Bayer's bid too low, those suggest a bright future for the company whether it flies solo or pairs up.