Market Overview

Citi Analysts Respond To Recent Monsanto Deal Talk

Citi Analysts Respond To Recent Monsanto Deal Talk
Related MON
Warren Buffett Pushing More Cash To Equities; 'Big 5' Stocks Still At The Top
Q1 13F Roundup: How Buffett, Einhorn, Ackman And Others Adjusted Their Portfolio
Related BAYRY
Portola Pharma Rips 20% Higher After FDA Approves Andexxa Antidote
Monsanto Displays Robust Research & Development Moves
Bayer to stop Essure sales in U.S. at year-end (Seeking Alpha)

Citi, in a note to clients dated July 14, said although Bayer AG (ADR) (OTC: BAYRY) has increased its offer for Monsanto Company (NYSE: MON), "it may still fall short of expectations."

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.

Other Possibilities?

Meanwhile, Bloomberg reported that Monsanto and BASF SE (ADR) (OTC: BASFY) have resumed talks regarding a potential acquisition of BASF's Ag chemical business.

Related Link: Monsanto Confirms Bayer's Revised Proposal

"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.

Did you like this article? Could it have been improved? Please email with the story link to let us know!

Latest Ratings for MON

Apr 2018ArgusDowngradesBuySell
Apr 2018BMO CapitalDowngradesOutperformMarket Perform
Oct 2017Wells FargoMaintainsMarket Perform

View More Analyst Ratings for MON
View the Latest Analyst Ratings

Posted-In: Analyst Color News Price Target Commodities Reiteration M&A Markets Analyst Ratings Best of Benzinga


Related Articles (BAYRY + BASFY)

View Comments and Join the Discussion!