Bayer's unsolicited takeover offer for Monsanto met with scepticism as concerns mounted that the German company would need to take on too much debt and dilute equity holdings in its quest to acquire an embattled target.

Shares in Bayer plunged by the most in seven years in Frankfurt after the drugmaker confirmed an offer to buy the world's largest seed producer, which has a market value of about $45 billion (€59 billion), for an undisclosed amount in a move that would make it the world's biggest supplier of farm chemicals.

Monsanto’s stock posted muted gains, rising less than 5 per cent.

The proposal by Werner Baumann, who has 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 and DuPont.

Monsanto said on Wednesday night that it was reviewing the offer hours after its chief operating officer Brett Begemann told Reuters “there’s nothing there”.

Bayer was considering asset disposals and a share sale to finance the deal, according to sources.

“The acquisition is just one notch too big,” said Markus Manns, who oversees about $250 million in assets at Union Investment, including Bayer shares, in Frankfurt.

“It is unclear why, of all things, they would choose to do it now.”

The German company was exploring the potential disposal of its animal health business and the remaining 69 per cent stake in plastics business Covestro, the sources said, asking not to be identified because discussions were private.

The purchase would be break-even on the basis of earning per share only if Bayer capped the offer at $108 a share and raised $15 billion in debt and $27 billion from equity sales, Sanford C Bernstein analysts  Jeremy Redenius, Ronny Gal and Jonas Oxgaard wrote in a note to clients yesterday.

However, the company was likely to need to pay about $120-$125 a share to get the deal done, they said. – (Bloomberg)