Jefferies Expects Monsanto To Decline Bayer's Proposal
Monsanto Company (NYSE: MON) confirmed an unsolicited offer from Bayer, without disclosing terms. Jefferies’ Laurence Alexander maintained a Hold rating for the company, with a price target of $95. The analyst believes the deal is “relatively unlikely” to go through, with a likelihood of less than 25 percent.
Analyst Laurence Alexander mentioned that even with the deal with Bayer [Rated: Hold] being unlikely, it could have a near-term positive impact on the shares of Monsanto, Novozymes [Rated: Hold] and FMC Corp (NYSE: FMC) [Rated: Buy], while having a negative impact for BASF [Rated: Hold], Syngenta AG (ADR) (NYSE: SYT) [Rated: Buy] and E I Du Pont De Nemours And Co (NYSE: DD) [Rated: Hold].
“We expect Monsanto to object to the offer, given its conviction (more adamant than ours) in its R&D pipeline and longer-term competitive advantages,” Alexander wrote. He said that the current target of a mid-teens CAGR implied an EPS of ~$7.70 in 2019. On a 1.5x PEG ratio, this implied a stretch value of $169, or $127 in 2016, if discounted at 15 percent.
The prior targets would have supported an EPS of $10 and a stretch target of more than $250, implying more than $189 in 2016 on a 15 percent discount rate. “Rejection appears highly likely,” the analyst commented.
Latest Ratings for MON
|Nov 2016||OTR Global||Upgrades||Negative||Mixed|
|Sep 2016||Goldman Sachs||Upgrades||Sell||Neutral|
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