By Jacob Bunge and Jesse Newman 

Bayer AG's offer to buy Monsanto Co., on the heels of two other giant agricultural deals, would put a significant share of the corn-seed and pesticide market in the hands of just three companies, raising concerns among U.S. farmers and legislators about more expensive products and fewer choices.

Germany's Bayer on Thursday said it had approached St. Louis-based Monsanto about a possible deal. Details weren't disclosed, but the bid would likely be above Monsanto's current market valuation of $42 billion, making it the largest-ever German takeover of a foreign company. Monsanto said late Wednesday that its board would consider the unsolicited approach, and declined to comment further on Thursday.

In a little over six months, Dow Chemical Co. and DuPont Co. reached a merger deal that would then split the new entity into three new companies focused on agriculture, materials and specialty products. And government-owned China National Chemical Corp. agreed to acquire Swiss pesticide and seed company Syngenta AG. Both deals are currently under regulatory review.

Any further industry consolidation would likely require antitrust authorities at the U.S. Department of Justice and the European Commission to alter their analyses of the agriculture sector's already-announced deals, said Andre Barlow, partner at Doyle, Barlow & Mazard PLLC, who advises companies on merger reviews but isn't involved in any of the agricultural deals.

"The Dow-DuPont and ChemChina-Syngenta [deals] raise their own issues, but the DOJ will have to examine how all three deals impact the competitive landscape going forward in seeds and crop protection," Mr. Barlow said.

The Justice Department didn't respond to requests for comment.

Following these deals, a potential combination of Bayer and Monsanto would put 83% of U.S. corn seed sales and 70% of the global pesticide market under the control of the three consolidating companies, raising fears from the agricultural sector at a time when farmers face heavy pressure after three years of sliding crop prices.

"There will almost certainly be much less competition in the marketplace, and as a direct result of that farmers will end up paying higher prices than they otherwise would be paying," said Roger Johnson, president of the National Farmers Union, a Washington-based lobby group for farmers and ranchers.

The companies have previously portrayed these deals as beneficial for farmers because they would allow growers to cut their own costs, pass on savings to customers and potentially bring new products to market faster.

A spokesman for Syngenta said the company "is focused on closing the ChemChina transaction, which will ensure continued choice for growers world-wide."

Dow and DuPont didn't respond to requests for comment, and Bayer couldn't be reached for comment on the matter.

Analysts were mixed on financial merits of the latest potential tie-up. Sanford C. Bernstein & Co. analysts said acquiring Monsanto outright "does not make sense financially" as Bayer likely would need to issue $30.3 billion in equity and raise $16.8 billion in cash, and may need to sell its animal-health business to help fund a deal. Absorbing Monsanto and then splitting off the combined agriculture business "could create value," Bernstein analysts said.

Bayer investors appeared to question such a move Thursday, sending Bayer shares 8.2% lower at EUR88.51 in Frankfurt. Monsanto shares closed 3.5% higher at $100.55.

Monsanto late Wednesday said there was no guarantee of a deal. The company has explored consolidation previously, including its failed $46 billion bid for Syngenta AG last year. It isn't clear whether Monsanto wants to be sold or whether the companies would be able to agree on terms.

Seed companies like Monsanto and DuPont have battled one another on price to retain market share as a slumping agricultural sector and falling corn and soybean prices have forced farmers to scrimp on spending on seeds, sprays, fertilizers and equipment. Monsanto, the world's largest seed company, also licenses genes that enable biotech crops to withstand pests, herbicides and drought.

In the U.S., farm-state politicians could raise food-security concerns when confronted with the potential for about 40% of U.S. corn and soybean seeds being sold by non-U.S. companies if Monsanto becomes German-owned.

"I don't know whether a foreign company would have as much interest in American agriculture that a domestic company has," Sen. Charles Grassley (R., Iowa) said Thursday.

Mr. Grassley said a Bayer-Monsanto deal would likely prompt him to raise concerns with the Justice Department. Mr. Johnson from the NFU said the group plans to ramp up efforts to take its concerns over competition to lawmakers and press for deeper scrutiny of the deals.

Meanwhile, opposition to genetically modified organisms is strong across much of Europe, and only one biotech crop is approved to be grown in the 28-nation European Union.

While that opposition doesn't translate into legal grounds to stop Bayer's proposed acquisition of Monsanto, analysts said, it may spark fresh pushback from critics of genetically modified crops, who have argued that pesticides tailored to biotech seeds cause environmental harm and that widespread planting of single crops diminishes biodiversity.

"Monsanto represents so much of what's wrong with agribusiness," said Anton Hofreiter, head of the opposition Green Party grouping in the German parliament. "At the same time people are becoming more skeptical about the agricultural industry, Bayer turns around and invests in this consumer and environmentally hostile direction."

Combining Monsanto's No. 1 position in crop seeds with Bayer's much broader pesticide portfolio would lead to 28% of world-wide pesticide sales, 36% of the U.S. corn seed market and 28% in soybeans, according to Morgan Stanley estimates.

The Dow-DuPont deal forged last year would form a new player with about 17% of global pesticides, 41% of U.S. corn seed sales and 38% of U.S. soybean seeds. And Syngenta's sale to ChemChina would give the Chinese state-owned company 26% of the global market in crop chemicals, along with Syngenta's businesses in corn, soybean and vegetable seeds.

Nathan Fields, director of biotechnology at the National Corn Growers Association, said U.S. farmers want companies to compete and keep farm supply prices down. But with the farm sector downturn, "having a lot of competitors and not having healthy competitors is a completely different issue," he said.

Some farmers, like Tim Malterer, said they see the wisdom of corporate mergers. "As times get tougher I definitely see the benefit of working together and merging," said Mr. Malterer, who raises corn and soybeans on about 750 acres near Janesville, Minn., and buys Monsanto seed and chemicals from Dow, DuPont and Syngenta. "My one concern is whether us, as the end customer, will be taken care of, versus stockholders instead."

--Sarah Sloat contributed to this article.

Write to Jacob Bunge at jacob.bunge@wsj.com and Jesse Newman at jesse.newman@wsj.com

(END) Dow Jones Newswires

May 20, 2016 02:47 ET (06:47 GMT)