Bayer (BAYRY)  investors delivered the market equivalent of a resigned shrug in response to their company's improved $65 billion offer for Monsanto (MON) , with shares in the German bidder sliding after it said late on Monday that takeover talks were progressing.

Bayer shares opened Tuesday at €93.51 ($104.43), down almost 1% on their Monday close, before recovering to €94.00 ($104.88). The stock has fallen 2% since Monday morning, when reports first emerged that Bayer was preparing a third offer for the world's biggest seed maker.

"Bayer confirms advanced negotiations with Monsanto concerning a proposed transaction," said the Leverkusen-based group. "While key terms have not yet been agreed, Bayer would be prepared to provide a transaction consideration of $127.50 per Monsanto share only in connection with a negotiated transaction."

Monsanto shares are likely to rally Tuesday. They traded at $110 in the pre-market, up $2.56, or 2.4%, on their close on Friday, the last day of trading due to Monday's Labor Day holiday in the U.S.

Monsanto described the talks with Bayer as "constructive" but said it was still evaluating "proposals from other parties and other strategic alternatives." The St Louis-based target is holding out for a bid of $130 per share, according to a report in German daily Rheinische Post, which on Monday broke the news that Bayer was preparing a new bid.

Bayer's shareholders have never been exactly enthusiastic about a Monsanto bid, worrying that it will stretch a balance sheet already loaded with €30 billion of debt and pension liabilities and would drain capital from Bayer's highly profitable pharmaceuticals business.

"Initial investor feedback seems to suggest surprise at the perceived change in capital allocation priorities," Goldman Sachs analysts including Keyur Parekh and Tim Woodward recently noted.

British fund management group Henderson, which ranks among Bayer's 20 biggest shareholders, has been one of the most vocal opponents of Bayer's bid and voiced its opposition again on Tuesday.

"The money would have been better spent buying their own stocks," Henderson fund manager John Bennett wrote in an email. "Alas, for shareholders, it was not to be."

Other commentators warned that even if Bayer and Monsanto reach an agreement there is still no certainty that a deal will conclude.

"Rapid concentration of the industry will give the US Department of Justice plenty to consider...expect plenty of major demands and concessions," noted John Colley, a Warwick Business School professor. "The stock market still does not think the deal will run as Monsanto's shares remain almost 20% below the new bid offer."