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London: Monsanto Co. has revived talks with BASF SE about a possible combination of their agrochemicals businesses, according to people familiar with the matter, as it seeks alternatives to a takeover offer from Bayer AG.

The US company is exploring various transactions, including the potential acquisition of BASF’s agriculture-solutions unit, the people said, asking not to be identified as the discussions are private. In return, Ludwigshafen, Germany-based BASF would likely receive newly issued shares in Monsanto, the people said. The discussions are at an early stage, and no final decisions have been made, they said. Talks with Bayer are continuing, they said.

Monsanto’s board is split over the merit of potential deals with rivals BASF and Bayer, one of the people said, with some executives keen to remain independent and others preferring a takeover. The company in May rejected a $122-a-share offer from Bayer, saying the bid, which valued the company at $62 billion, was too low. It said in its earnings statement last month that it has been in discussions over the last several weeks with Bayer, as well as with other parties, about “alternative strategic options."

Monsanto would likely face pressure from its shareholders if it opted to buy BASF’s division and issues shares to pay for it instead of accepting Bayer’s all-cash premium offer, one of the people said. The price represented a 37% premium on Monsanto shares from their 9 May level.

Representatives for BASF and Monsanto declined to comment.

Earlier this year, Monsanto held talks with both BASF and Bayer about possible deals after losing the battle for Syngenta AG to China National Chemical Corp., people familiar with the matter said in March. BASF until now has sat on the sidelines and focused on smaller transactions, including the purchase of a coatings business from Albemarle Corp. for $3.2 billion last month.

Plant partnership

BASF’s plant science unit has had a partnership with Monsanto since 2007. The division, which is separate from its crop fungicides and herbicides operation, develops genetically-modified seeds for crops such as corn, soybean and rice. The German company doesn’t disclose separately any income it derives from the venture.

Monsanto has become vulnerable to a takeover as a number of problems piled up this year. The company’s profits continue to suffer, and it has said full-year earnings will now be at the low end of a previously announced range of $4.40 to $5.10 a share. It has also clashed with some of the world’s largest commodity-trading companies and been locked in disputes with the governments of Argentina and India.

A Bayer takeover would be the largest deal this year and the biggest ever by a German company, creating the world’s biggest supplier of farm chemicals and seeds.

The rest of the crop and seed industry is being transformed by a series of large transactions. ChemChina agreed in February to acquire Syngenta for about $43 billion, while DuPont Co. and Dow Chemical Co. have said they plan to merge and then carve out a new agrochemicals unit. Bloomberg

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