Why Bernstein Is Upgrading Syngenta

In a report published on Tuesday, analysts at Bernstein upgraded

from Underperform to Market Perform. The price target was raised from CHF250 to CHF388. Although the analysts expressed their concerns regarding the ultimate success of a merger with

, they expect Monsanto to come back with a higher bid for Syngenta. "At first glance the deal is cash accretive; however, our ROIC analysis dictates this deal does not create value," the analysts said, while adding that the "synergies would have to be very high" at $2 billion for the merger to prove accretive. According to Bernstein, "Nevertheless, with low-cost debt financing it's "easy" to make the deal cash accretive by 2018 with a purchase price up to $55bn or CHF560 per share. Monsanto also has the balance sheet capacity." The analysts also believe that there could be various risks associated with the success of the Monsanto-Syngenta combination, such as culture clashes between the very American Monsanto and a more globally oriented Syngenta and the impact of public opinion and regulatory requirements. In addition, "the management will need to make a strong, and difficult, pivot to cost reduction after so many years of focussing on growth and innovation," the analysts added.