April 13, 2011
BASF does not intend to acquire Monsanto
Germany''s BASF SE has no intention to purchase global biotech seed company Monsanto, according to sources who have prior knowledge of the situation on Tuesday (Apr 12).
Rumours that a buyout was imminent sent shares of Monsanto up as much as 4% while shares of BASF, the world''s largest chemical maker, fell 2.8% to EUR62.59 (US$90.65).
A tie-up with Monsanto would give BASF a deeper footing in the US and help it compete with agricultural rivals, including DuPont''s Pioneer unit and Dow Chemical''s DowAgroSciences unit.
Yet three sources with knowledge of the situation said BASF currently has no plans to make a bid for Monsanto although BASF and Monsanto declined to comment.
The sources said any bid for Monsanto would need to be high, with some speculating any offer would need to be a 100% premium to Monsanto''s market cap, which is roughly US$37 billion.
Activity in both stocks was high, with more than 5.8 million Monsanto shares trading hands. The stock''s average daily trading volume is roughly 4.8 million.
"Monsanto shares and front-month call options are active on unconfirmed rumours that BASF is interested in the company," a broker said.
Investors often turn to equity call options, which grant them the right to buy the stock at a fixed price any time up until expiration, to speculate on share price appreciation.
The two companies are rivals as well as collaborators, most recently announcing an agreement to jointly develop dicamba-tolerant cropping systems similar to the highly successful Roundup Ready herbicide-tolerant genetically modified crops for which Monsanto is known.
The system is expected to be introduced in the US and Canada in the middle of the decade, pending regulatory approvals.
The two companies also have established a research and development collaboration to develop other new genetically modified crops for farmers.