Monsanto Co. rejected a $62 billion takeover offer from Bayer AG as too low, while saying it remains open to further deal talks, putting pressure on the German company to raise a bid that has already sent its stock tumbling.

“We believe in the substantial benefits an integrated strategy could provide to growers and broader society, and we have long respected Bayer’s business,” Monsanto Chief Executive Officer Hugh Grant said in a statement Tuesday.

“However, the current proposal significantly undervalues our company and also does not adequately address or provide reassurance for some of the potential financing and regulatory execution risks related to the acquisition," he said.

Bayer will likely come back with a higher bid, Jonas Oxgaard, an analyst with Sanford C. Bernstein & Co. in New York, said Tuesday in a note, adding that an offer below $135 per share would be “challenging” for Monsanto to agree to.

Buying Monsanto would create the world’s biggest supplier of farm chemicals and seeds. Monsanto is the largest seed supplier and a pioneer of genetically modified crops, which two decades on from their introduction have come to account for the majority of corn and soybeans grown in the U.S. Monsanto also sells seeds in foreign markets including Latin America and India.

David Fuller's view

This is clearly a friendly reply by Monsanto, suggesting that it would welcome the merger takeover at a higher price. 

Monsanto will be influenced not only by its failure to take over the Swiss pesticide maker Syngenta AG for $43.7 billion last August, but to also see it accept a $43 billion bid from the unlisted China National Chemical Corp in February.  Moreover, Dow Chemical and DuPont have agreed to merge and form a new crop-science division.  Merger manias have produced decidedly mixed results in the past but clearly Bayer and Monsanto feel they need more corporate muscle to remain globally competitive.