Speculation rampant a week ago that Bayer could be preparing a hostile bid for Monsanto was confirmed by the two companies on May 18 and 19. On the heels of Monsanto’s announcement in the late evening hours of May 18 US time, that it had received “an unsolicited, non-binding proposal” from Bayer for a potential acquisition, the Leverkusen, Germany-based group confirmed that it had “recently met with executives of Monsanto to privately discuss a deal.”

The confirmation came shortly after Monsanto’s president, Brett Begemann, commented to the press that rumors of a Bayer bid amounted to “wild speculation.”

Neither of the industry giants provided any information on the possible content or extent of the bid. The US company’s board of directors said it would review the offer, in consultation with its financial and legal advisors, but would not comment further until the review had been completed. Analysts have put the potential value of a Monsanto takeover at $42-43 billion, based on the company’s market capitalization. With its pharmaceuticals and agrochemicals franchises combined, Bayer is more than twice as big, with a capitalization of around $90 billion.

Some said the final price accepted by Monsanto could represent a premium of as much as 35-40% over the US company’s current value, or around $120-125 per share. Monsanto, which depends largely on seeds for its sales revenue, has been seeking a deal that would add more conventional crop protection products to its portfolio.

Apart from establishing itself as the world agrochemicals market leader, Bayer is thought to be interested in strengthening its franchise in seeds, especially as this market alone is projected to be worth around $6 billion by 2020.

As well as being Germany’s biggest-ever deal, the grab for Monsanto would be the most expensive in Bayer’s corporate history, far surpassing the €17 billion it plunked down for Schering in 2006 and the $14 billion it paid for the Merck &Co OTC business in 2014. It would be nearly six times what the company paid in 2002 for Aventis CropScience, the nucleus of its current agrochemicals portfolio.

To finance a transaction this large, analysts said, the German group would undoubtedly have to shed the remaining 69% it holds in Covestro, its former MaterialScience sub-group partially floated last autumn, along with the equally tradition-steeped animal health business, which it has been unable to strengthen through acquisition as hoped.

Even this may not be enough to stem the acquisition, they said.

Competition authorities in Europe, the US and Asia will have a major say in any transaction. Any required divestments aside, some commentators have suggested that, especially in view of the pending Dow-DuPont transaction, it could take considerable time to get such a mega-merger approved.

If the two parties to the potential link-up are not putting any cards on the table, this has not stopped others from talking and speculating on how a Bayer-Monsanto combination might look. Bayer’s brief remark that the merger would create “a leading integrated agriculture business” has provided fodder and fantasy for projections.

Although the official plan calls for a full merger of the two companies, analysts and many other observers believe that the companies could strive to create an eye-to-eye rival to the merged DowDuPont agriculture unit, leaving Bayer free to concentrate on its drugs business.

The latter scenario would undoubtedly be more appealing to Bayer shareholders, which apparently are unhappy about a combination of the German and US groups’ activities. Bayer’s shrinking share price (down more than 8% in trading following the announcement) is seen as proof.

“Investors have invested in Bayer for its healthcare franchise, not for its agrichemicals business. So buying Monsanto is not what they want,” Jeremy Redenius, senior analyst at Sanford C. Bernstein & Co, told the newspaper Financial Times.  Bayer’s worth could also be dimensioned if it has to issue a large number of new shares to finance a deal for Monsanto, he added.

In a note to clients, Bernstein’s analysts calculated that the takeover of Monsanto would add only 3-4% to Bayer’s earnings by 2020, this best-case scenario assuming certain factors such as the sale of its animal health business for €5 billion.

While Bayer’s new CEO, Werner Baumann, in his first meeting with journalists after taking over from Marijn Dekkers at the end of April, did not rule out large acquisitions, Dekkers – reacting to earlier reports of a bid by Monsanto for Bayer – said the US group “is not a logical acquisition target for Bayer.” He noted also that the two corporate cultures were not a good match.

On Bayer’s home turf in Europe, where anti-GMO sentiment runs high, such a deal would surely not be welcomed. Immediately after reading the latest merger news, environmental advocacy groups most likely were already drafting their protests.

The EU’s further postponement of a vote on whether to extend the registration of glyphosate, the main ingredient in Monsanto’s Roundup Ready seeds-to-herbicides program, simultaneously with Bayer’s confirmation of its bid for the US company, is unlikely to be seen as a good omen. What’s more, the Leverkusen player is already embroiled in a dispute with European authorities over the threat to bees possibly associated with its neonicotinoid-based pesticides.

The wild card in the current M&A deck is undoubtedly BASF. The general consensus is that a Bayer-Monsanto deal would relegate the Ludwigshafen, Germany-headquartered group – the world’s largest chemical producer in terms of sales – to the sidelines in the shadow of two new industry rivals, including the merged DowDuPont.

It also remains to be seen what would happen to BASF’s cooperation with Monsanto in which BASF develops seed traits and leaves product development and marketing to Monsanto. Some  have speculated on a rival bid for Monsanto by BASF, although this would require topping Bayer’s bid by a wide margin.