Citi Analysts Respond To Recent Monsanto Deal Talk
Bayer raised its offer to acquire Monsanto, one of the biggest seed makers, by $3 to $125 a share, representing a 15.6x multiple on MON's 2017E EBITDA. In addition, Bayer is offering Monsanto a $1.5 billion reverse break free should the deal be blocked by regulators.
"We think that this was one of the potential 'other options' MON management hinted at on their 3Q conference call. Given the outstanding offer by Bayer to acquire MON, it is difficult to glean whether this type of transaction has potential, or if this is posturing," Citi analyst P.J. Juvekar wrote in the note.
"Further, it is unclear to us that BASF is a willing seller in this market, although we have discussed the potential of a JV in the past. BASF may be interested in being an acquirer of assets which may be divested during this round of Ag industry consolidation," Juvekar continued.
Juvekar noted that if Monsanto makes a takeout offer for BASF's Ag business, it would likely result in a transaction value in the range of approximately $22 billion–$25 billion, based on forward EBITDA multiples of roughly 14–15x, a discount to the Bayer offer for Monsanto. Citi expects BASF 2017 Ag EBITDA near $1.6 billion.
Citi's Bottom Line
"We think BASF's business would be valued at a discount to MON because it does not have seeds. Any transaction would be third in the queue for regulatory approval behind Syngenta-ChemChina and DOW-DuPont," Juvekar added.
Juvekar has a Neutral rating and $112 price target on Monsanto stock.
Shares of Monsanto closed Friday's regular trading session at $103.45, while ADRs of Bayer closed at $103.70.
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Latest Ratings for MON
|Nov 2016||OTR Global||Upgrades||Negative||Mixed|
|Sep 2016||Goldman Sachs||Upgrades||Sell||Neutral|
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