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Citi Analyst Shows Skepticism Monsanto Could Be Purchased by BASF, Sees 'Low Probability Event'

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The analyst lists four reasons why a bid by a larger player for Monsanto Company (NYSE: MON) would be unlikely:

  1. "BASF has said that it would be conservative on large scale M&A. Monsanto has a $39.5bn market cap, assuming a 30-40% premium on acquisition which implies a €45-€49bn equity valuation. We think that this would require equity funding by BASF as net debt to EBITDA is currently approx. 1.1x, and has yet to issue equity in its 150 year history.
  2. "We think such a deal would likely carry a 13-14x EV/EBITDA 2017E multiple on consensus expectations vs BASF trading at 7.1x. We think this would go against the strong weight that BASF puts on the value creation opportunity available from executing acquisitions.
  3. "There is considerable uncertainty in the Agchem industry through the announced acquisition of Syngenta by ChemChina, which could dramatically change participant behaviour and competitive dynamics in the market. Again, the size of this deal, this increases the risks.
  4. "The announced consolidation to date in the industry could lead to asset sales and divestments by regulators, BASF may be interested in knowing what those opportunities are before making a more significant move."

Latest Ratings for MON

Oct 2017Wells FargoMaintainsMarket Perform
Oct 2017BarclaysMaintainsEqual-Weight
Aug 2017UBSDowngradesBuyNeutral

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