Bayer AG made an unsolicited takeover offer for Monsanto Co. in a bold attempt by the German company to snatch the last independent global seeds producer and become the world’s biggest supplier of farm chemicals.

The St. Louis-based company, with a market value of $42 billion, said it’s reviewing the offer in a statement Thursday. It didn’t disclose the terms of the proposal. Bayer, confirming the bid, said the combination would bolster its position as a “global innovation-driven life science company.” Bloomberg News was first to report a week ago that Bayer was exploring a potential takeover.

Shares of Bayer plunged amid concern that a large purchase would weigh on its credit rating and force the company to sell more stock. The proposal by Werner Baumann, who’s been at Bayer’s helm for less than a month, follows Monsanto’s failed attempt to buy Syngenta and the proposed merger of Dow Chemical Co. and DuPont Co.

To help finance its quest to buy the world’s largest seed maker, Bayer is considering asset disposals and a share sale, according to people familiar with the matter, who asked not to be identified because discussions are private. The German company is exploring the potential disposal of its animal-health business and the remaining 69 percent stake in plastics business Covestro AG, the people said.

Stock Plunge

If Bayer buys Monsanto, it could be the biggest acquisition globally this year and the largest German deal ever, according to data compiled by Bloomberg. A takeover of Monsanto would require an enterprise value of as much as 65 billion euros ($73 billion), according to analysts at Citigroup Inc.

Bayer fell 8.4 percent, the most in almost nine months, to 88.37 euros as of 11:59 a.m. in Frankfurt trading. It’s the stock’s lowest price since October 2013. The shares had dropped 17 percent this year, through Wednesday.

Merging Monsanto with the company that invented aspirin would bring together brands such as Roundup, Monsanto’s blockbuster herbicide, and Sivanto, a new Bayer insecticide. A wave of deals is already reshaping the seed and crop-chemicals industry. China National Chemical Corp. agreed in February to acquire Switzerland’s Syngenta AG for about $43 billion, months after Monsanto abandoned its own bid for Syngenta. DuPont and Dow plan to merge in a $65.6 billion deal and then carve out a new crop-science unit.

Record Deals

A price around $120 to $125 a share, representing a premium of 35 percent to 40 percent, would probably be needed to get a deal done, Sanford C. Bernstein & Co. analysts Jeremy Redenius and Ronny Gal wrote in a note to clients Thursday. At that price, the acquisition would only add about 3 percent to 4 percent to earnings by 2020 if Bayer sells its animal-health business for around 5 billion euros, extracts $2 billion in cost savings and can sell shares at 95 euros apiece, they wrote.

A completed acquisition would extend a record-setting pace of consolidation in the global chemicals sector, which has seen $84 billion of deals this year as low crop prices encourage mergers, according to data compiled by Bloomberg. With a premium, a takeover of Monsanto could surpass ChemChina’s purchase of Syngenta as the largest acquisition globally this year, the data show. 

Monsanto shares closed at $97.13 in New York trading on May 18. Bayer shares dropped 3.35 percent to 93 euros at 8:17 a.m. in Frankfurt.

Agricultural Commodities

“Despite the ongoing consolidation in the agrochemicals market, we believe there is no need for Bayer to rush into a deal with Monsanto,” Bankhaus Lampe KG analyst Volker Braun said in a research note. “We see enough opportunities arising from pending M&A transactions in the industry to buy assets at better prices and more favorable risk profiles.”

Monsanto is facing a slump in agricultural commodities and its offer to buy Syngenta for about $46.2 billion was spurned last year. Sales in the quarter ending in February fell 13 percent from a year earlier to $4.53 billion. Prices for corn and soybeans declined in the last three calendar years, hurting demand for everything from tractors to weedkiller.

A deal with Bayer would help the company reduce its reliance on the agriculture industry, while Monsanto would strengthen Bayer’s seed business, one of the company’s priorities.

Modified Seeds

Morgan Stanley & Co. and Ducera Partners are Monsanto’s financial advisers, and Wachtell, Lipton, Rosen & Katz is its legal adviser. Bayer in an e-mailed statement confirmed that it had recently met with Monsanto executives to “privately discuss a negotiated acquisition” of the seedmaker.

Bloomberg News reported earlier this month that Bayer had been exploring a potential bid for Monsanto in a deal that would create the world’s largest supplier of seeds and farm chemicals, citing people familiar with the matter.

Monsanto was founded in 1901, its first product the artificial sweetener saccharin. It introduced one of its first genetically modified seeds in 1996, Roundup Ready soybean, spawning heated controversy with critics of biotechnology. Bayer’s products range from blood thinner Xarelto to consumer products and pest-control treatments for farmers.

Bayer is transitioning to new leadership. Strategy head Baumann took over from Chief Executive Officer Marijn Dekkers this month. Dekkers reshaped Bayer, increasing its focus on life sciences by buying Merck & Co.’s over-the-counter medicines business and divesting a stake in its plastics unit.