As the agribusiness industry consolidates, Monsanto (MON) is using fear of regulatory scrutiny to demand more for its business, even though any deal will be hard pressed to be completed.

There are just a lot of things lining up against this potential combination. Monsanto keeps kicking back Bayer's (BAYRY) bids. The Senate Judiciary Committee will start holding hearings on seed deals that will bring up many arguments against further sector consolidation. Any deal would face a Justice Department already looking at agriculture deals and which was hostile to similar M&A in health care. And then there are the European regulators -- not exactly the best friends of megadeals.

Bayer (BAYRY) confirmed Tuesday that it is in "advanced negotiations" with Monsanto, announcing that it would be willing to pay $127.50 per Monsanto share, a 35.9% premium for the seed giant whose performance may not warrant such a substantial bounty.

"Monsanto's business has not performed well, so you're talking about a business that's currently trading at 18x EBITDA [earnings before interest, taxes, depreciation and amortization]," said CNBC's Dave Faber on "Squawk on the Street" Tuesday. "And, therefore, the question is, 'How much more of a premium can we give you?'"

Well, apparently Monsanto wants more than the inflated bid that is already on the table.

"Monsanto and Bayer are moving closer to a deal, and we could see the deal within the next week or two, according to people familiar with the situation," Faber said. He estimated that a final bid could reach $128 or $129.

The agrochemical company has already rebuffed two previous bids from Bayer. For the German conglomerate's initial bid of $122 per share, Monsanto said the proposal was "incomplete" and "financially inadequate."

"The current proposal significantly undervalues our company, and also does not adequately address or provide reassurance for some of the potential financing and regulatory execution risks related to the acquisition," said Monsanto CEO Hugh Grant in a statement.

Bayer's second bid of $125 a share was also viewed as insufficient. So the company from Leverkusen, Germany, came back with a third bid.

But even with the third bid, the company said in a statement that it is still continuing to evaluate "proposals from other parties and other strategic alternatives," and that there is "no assurance" that any transaction will get done.

And even if Monsanto finally gets the price it wants from Bayer, the deal is still subject to intense U.S. and European regulatory scrutiny.

"The idea that these two companies can get together is fanciful, because I think the [European Union] will block it," said TheStreet's Jim Cramer last week.

Following Bayer's third bid, Cramer added that the EU doesn't even want to see these two companies talking. "Farmers in Europe and the United States are protected classes... you can't do anything that makes it so that they suffer," he said.

And regulators in the U.S. are also closely watching proposed mergers within the agriculture space.

The Senate Judiciary Committee is holding hearings later this month on the consolidation of the agriculture industry, following the proposed mergers of Bayer and Monsanto, as well as Dow Chemical (DOW) and DuPont (DD - Get Report)  and China National Chemical Company (ChemChina) and Syngenta (SYT) . (Dow is a holding in Jim Cramer's Action Alerts PLUS portfolio). 

"The seed and chemical industries are critical to agriculture and the nation's economy, and Iowans are concerned that this sudden consolidation in the industry could cause rising input costs in an already declining agriculture economy," said Iowa Senator Chuck Grassley.

Even though the committee has no final say over whether the deals will go forward, the Department of Justice is already looking at Dow and DuPont while ChemChina's acquisition of Syngenta is also under review. Given that the Justice Department has looked unfavorably on proposals between firms in the health-insurance industry, the agribusiness industry could see the same result.

Bayer will likely put forth another bid in an effort to meet Monsanto's desired purchase price. But between Monsanto's demand for a higher price and the intense scrutiny by regulators, it seems unlikely that a Monsanto and Bayer tie up will happen. 

Editor's Note: This article was originally published on Real Money at 11:13 a.m. on Sept. 7.

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Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long DOW stock.