JPMorgan: Monsanto Shares Could Hit $180 Over The Next 5 Years

Monsanto Company MON has rejected the $122 a share takeover offer from Germany's Bayer AG (ADR) BAYRY, saying that the offer is "incomplete and financially inadequate."

However, Monsanto is open to talks "to assess whether a transaction in the best interest of Monsanto shareowners can be achieved."

Related Link: Monsanto Terms Bayer's Proposal As "Incomplete" And "Financially Inadequate"

Analyst Take

JPMorgan too echoed Monsanto's views, saying that" $122 is an uninteresting offer and $150 is no more than tempting, in our view."

"We think that Monsanto would accept an offer from Bayer only if it no longer believed in its own long-term earnings capabilities," analyst Jeffrey Zekauskas wrote in a note.

Currently, Monsanto is facing cyclical weakness, flatter pricing and difficulties in the commercializing of its soybean products in Brazil.

Zekauskas said Monsanto could double its earnings and share price over a five-year period in a cyclically favorable agricultural environment, coupled with successful technology introductions: "Let us say, going from $90 to $180."

Monsanto combined with Bayer's crop sciences business would be a $26.5 billion agricultural company based on 2015 revenues.

Related Link: "As The Dust Settles," Deutsche Bank Says Bayer Remains A Buy

Another Perspective

The analyst, who rates Monsanto Neutral, said the antitrust hurdles for the deal "should be low," but Jim Cramer recently said the deal would be blocked by regulators as a German firm buying a U.S. company would attract regulatory concerns around tax inversion. The $160 billion merger of Pfizer Inc. PFE and Allergan plc Ordinary Shares AGN collapsed on tax inversion issues.

"It is less clear whether there are issues regarding substantial U.S. seed trait technologies being owned by a foreign entity," Zekauskas added.

At the time of writing, shares of Monsanto were up 2.68 percent to $108.83 and ADRs of Bayer were also up 3.48 percent to $98.80.

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