German pharmaceuticals group Bayer has stepped up its pursuit of Monsanto and offered offered $65bn (£48.7bn) for the controversial maker of genetically modified seeds.

Bayer had already proposed the largest all-cash takeover in history with an offer of $125 a share and said it was now willing to raise its bid to $127.50.

According to reports in Germany, Monsanto has opened its books to Bayer.

But one major investor raised concerns about the effect on Bayer’s pharmaceuticals strategy and the combined company’s potential debt pile. Industry pundits also warned that the deal might not be worth doing once competition authorities have imposed their conditions.

In a statement, Monsanto said it had taken part in constructive discussions with Bayer about a new offer, the third since May, valuing the St Louis-based firm at $65bn.

Bayer’s proposal will create a global pharmaceutical and farm supplies giant, just as rival firms are consolidating. ChemChina agreed earlier this year to buy Switzerland’s Syngenta for $43bn, after the latter rejected takeover approaches from Monsanto. US firms Dow Chemical and DuPont are pursuing a $130bn merger, to be followed by a breakup into three businesses.

One Bayer shareholder said he had reservations about the deal. Greg Herbert, of Jupiter Global Equity Income Funds, said a takeover posed a “significant risk” for investors in Bayer. He said that while talks were “probably getting closer to succeeding,” he was still sceptical about the logic behind the acquisition.

“The company will be left with a highly geared balance sheet and the management effort to integrate the two businesses could easily lead to the larger pharmaceutical business being neglected.”

Acquiring Monsanto poses a reputational risk for Bayer, the 153-year-old Leverkusen-based firm that built a global presence with the invention of aspirin and trademarked the name ‘heroin’. Monsanto has been no stranger to controversy, drawing fire over the effect of its pesticides and the ramifications of widespread use of its genetically modified seeds.

Its most recent high-profile wrangle was over its weedkiller product Roundup, which was spared a recall from European shops in June. In a last-minute decision, the European commission agreed an 18-month extension permitting the use of glyphosate, a key ingredient of Roundup that has been deemed “probably carcinogenic” by a World Health Organisation study.

Monsanto has also become a hate figure for environmental groups around the world, who warn of the potentially damaging impact of its genetically modified crops. Monsanto, in turn, has asked for the debate on GM crops to focus on scientific evidence. It has also faced questions over the impact of its products on farmers in developing countries, where proponents of GM seeds say they can help end hunger.

But while public opinion is unlikely to obstruct a takeover, competition hurdles could scupper the deal in its current incarnation. Professor John Colleyfrom Warwick Business School said anti-trust regulators were likely to demand sizeable concessions, which could include selling businesses where the combined firm would control too much of a particular market.

“Monsanto’s falling profitability should be enough to sway any uncertain shareholders, but by the time competition authorities have finished the deal may well not have been worth doing,” said professor Colley. “This is likely to be no easy matter as the combined group will control around 30% of the global seed market. The big six who are reducing to three will have around 60% of the global seed and pesticides market.”

He added: “Expect plenty of major demands and concessions to gain competition clearance in Europe and the US.”

He pointed out that stock markets are yet to believe the deal will be done, given that Monsanto’s shares are still about 20% below both the improved bid price and Bayer’s previous offer.

The new bid from Bayer is its third tilt at Monsanto. In July, Bayer raised its earlier offer of $122 a share to $125 to put pressure on Monsanto.

Monsanto had turned down the $122 offer, but said it was open to further talks with the German company, as well as other parties. Reports in Germany have suggested that Bayer might need to stump up $130 a share to win round Monsanto investors.