German drugs and crop chemicals company Bayer has won over U.S. seeds firm Monsanto with a takeover offer of around $66 billion, a source close to the matter said, ending months of wrangling after increasing its bid for a third time.
The source said on Wednesday an agreement had been signed for Bayer to pay $128 per share, up from its previous offer of $127.50 a share.
That would be the biggest takeover deal of the year so far and the largest cash bid on record. Bayer and Monsanto were not immediately available to comment.
A deal would create a company commanding more than a quarter of the combined world market for seeds and pesticides in the fast-consolidating farm supplies industry.
However, competition authorities are likely to scrutinize the tie-up closely, and some of Bayer's own shareholders have been highly critical of a takeover plan which they say risks overpaying and neglecting the company's pharmaceutical business.
The transaction includes a break-fee of $2 billion that Bayer will pay to Monsanto should it fail to get regulatory clearance, the source told Reuters, adding the two firms expect the deal to close by the end of 2017.
At 1055 GMT, Bayer shares were up 2.5 percent at 95.59 euros. Monsanto's were down 0.8 percent at $106.1 in premarket trade.
Bayer's move to combine its crop chemicals business, the world's second largest after Syngenta AG, with Monsanto's industry leading seeds business, is the latest in a series of major tie-ups in the agrochemicals sector.
The German company is aiming to create a one-stop shop for seeds, crop chemicals and computer-aided services to farmers. That was also the idea behind Monsanto's swoop on Syngenta last year, which the Swiss company fended off, only to agree later to a takeover by China's state-owned ChemChina. Elsewhere in the industry, U.S. chemicals giants Dow Chemical and DuPont plan to merge and later spin off their respective seeds and crop chemicals operations into a major agribusiness. With a total value of around $66 billion — based on 442 million Monsanto shares and the U.S. group's net debt of $9.3 billion as of the end of May — the deal would be the largest transaction ever involving a German buyer.
It would trump Daimler's tie-up with Chrysler in 1998, which valued the U.S. carmaker at more than $40 billion. It would also be the largest all-cash transaction on record, ahead of brewer InBev's $60.4 billion offer for Anheuser-Busch in 2008.
Bayer and Monsanto were in talks to sound out ways to combine their businesses as early as March, which culminated in Bayer coming out with an initial $122 per-share takeover proposal in May.
Antitrust experts have said regulators will likely demand the sale of some soybeans, cotton and canola seed assets as a condition for approving the deal.