Shares of Monsanto Co. (MON) were up 11.0% to $100.30 at Thursday's open on a Bloomberg report that Bayer AG (BAYN.DE) is exploring a bid for the $40 billion agricultural chemicals company. The stock has pared its gains at the time of writing. The German company, valued at approximately $90 billion (€80 billion), is down 5.0% to €94.95 in afternoon trading, local time (10:50 a.m. EDT).
According to Bloomberg's unnamed sources, Bayer has held internal meetings with advisers regarding a potential acquisition, but no final decision has been made. Besides an outright acquisition, other options include joint ventures or asset sales. (See also: Vanguard Materials ETF: Top 5 Holdings.)
Consolidation elsewhere in the chemicals industry may be putting pressure on Bayer to stay competitive. Dow Chemical Co. (DOW) and I.E. Du Pont De Nemours & Co. (DD) announced in February that they would combine in a $130 billion merger of equals. China National Chemical Corp. followed in February with a $43 billion bid for Syngenta AG (SYT).
Monsanto had approached Syngenta about the possibility of a takeover prior to ChemChina's bid. In March, Monsanto floated the idea of buying Bayer's crop sciences division.
Monsanto's net income fell by 15.5% in 2015 as a slump in agricultural commodities hurt sales, which fell 5.4% to $15.0 billion. Prior to Thursday morning's report, the stock had fallen by 22.2% over the past twelve months, compared to a 1.7% decline in the S&P 500.
Buying Bayer would reduce Monsanto's exposure to the prices of staple crops such as corn and soybean, both of which have been in decline for three years. Besides agricultural products, Bayer develops prescription and over-the-counter medications as well as industrial materials.