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Monsanto’s Choice: Live the Dream With BASF, or Cash Out

  • Monsanto talks with BASF echo failed bid for Syngenta
  • Bayer boosted its bid for Monsanto by $3 a share to $125

With a newly sweetened bid in hand from Bayer AG, Monsanto Co.’s board faces a tough choice: Cash out now, or take a riskier route to the master plan it’s pursued for years.

Monsanto has long sought to become a one-stop shop for farmers by boosting its crop chemicals portfolio to complement its seeds business. To that end, it had pursued the purchase of Syngenta AG on at least three separate occasions over the years. While that push failed, the American seeds giant is now in talks to buy BASF SE’s agrochemicals unit, even as Bayer seeks to acquire Monsanto for $54.7 billion.

Last month, Monsanto said year-end earnings would settle at the lower end of guidance. BASF would boost the company’s offerings of fungicides and herbicides, creating a strong market leader in that sector. It could also dilute shares for investors at a time when Bayer’s bid offers a 20 percent premium over Thursday’s settlement.

“If you were hoping to get a lot of cash for your Monsanto shares in short order, you won’t like BASF,” said Chris Perrella, an analyst with Bloomberg Intelligence. “If you liked the Syngenta deal, though, this is going to be the same thing. And you’re going to like this deal even more because it’s a cleaner...