Market Overview

Citi On Possible Monsanto, Bayer Tie Up: 'Tax Synergies Unlikely To Be The Driver'

Share:

Monsanto Company (NYSE: MON) has received an unsolicited offer from Bayer, although the terms have not been disclosed. Citi’s P. J. Juvekar maintained a Neutral rating for the company, with a price target of $94. The analyst commented that there were challenges to the completion of a deal, while giving his views on potential synergies, including tax synergies, among other aspects.

Potential Synergies

Analyst P. J. Juvekar said that Monsanto is likely to command about $130 per share, and the bias is towards an upside to this. The synergies could range from 2-3 percent of the combined entity’s sales, which equates to ~$1.3B.

Tax Synergies

Juvekar commented that tax synergies were unlikely to be the driver for the deal’s completion. He wrote, “This proposal should not be directly compared to MON’s attempt to acquire Syngenta last year. That proposed transaction was partly driven by anticipated tax savings from moving the combined company HQ to the UK.”

On the other hand, Bayer’s tax rate is about 24 percent, while Monsanto’s tax rate in the US is 25-26 percent. Hence, significant tax savings are unlikely.

Potential Regulatory Concerns

Juvekar pointed out that there was significant overlap in the cotton seed business of both companies. When Monsanto acquired Delta and Pine Land, it needed to divest its own cotton business. This was acquired by Bayer. He added, “As a result, we think one of the cotton franchises would have to be divested.”

Latest Ratings for MON

DateFirmActionFromTo
Apr 2018DowngradesBuySell
Apr 2018DowngradesOutperformMarket Perform
Oct 2017MaintainsMarket Perform

View More Analyst Ratings for MON
View the Latest Analyst Ratings

Posted-In: Citi P. J. JuvekarAnalyst Color Reiteration Analyst Ratings

 

Related Articles (MON + BAYRY)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
POWLSidoti & Co.Maintains47.0
XDeutsche BankInitiates Coverage On121.0
WTEBMO CapitalMaintains18.0
DOLBMO CapitalMaintains50.0
NABMO CapitalMaintains69.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Twitter Delivers Letter To Investors Asking To Approve An Equity Incentive Plan

JPMorgan Downgrades B/E Aerospace, Emerging Risks Give Pause