Monsanto Doesn't Need Syngenta
Stephen Simpson, CFA
Stephen Simpson, CFA
Monsanto: A Very Compelling Long Opportunity Rarely Seen In Large Caps
Alpha Gen Capital • 163 Comments
Alpha Gen Capital • 163 Comments
Mon, Nov. 28, 1:41 PM
- Presenting at the Robin Hood Investors Conference, Greenlight Capital's (NASDAQ:GLRE) David Einhorn tells the crowd he likes Bayer (OTCPK:BAYRY) as a standalone or after a merger with Monsanto (NYSE:MON).
- Both stocks are modestly lower on the session, but have perked up since Einhorn made his comments.
Mon, Nov. 21, 12:59 PM
- Monsanto's (MON +0.2%) Climate Corp. agrees to acquire Estonia-based farm data company VitalFields for an undisclosed sum, in a deal that hastens the European expansion of MON's new data science unit.
- The Climate Corp. unit sells hardware and software that help farmers track their use of seeds and agricultural chemicals, monitor the weather and recommend planting strategies to maximize harvests.
- MON says it plans to incorporate Climate Corp.’s hardware and software into VitalFields’ systems, enabling data to flow more directly from tractors to online databases where farmers can manage it.
Fri, Nov. 18, 12:14 PM
- The president-elect intends to nominate Alabama Senator Jeff Sessions as the next Attorney General. While the immediate focus (in much of the media) seems likely to be his hardline stance against illegal immigration, Evercore ISI's Terry Haines says the choice means an immediate shift from the "red light" antitrust policy of the Obama administration.
- Source: Bloomberg
- That, of course, would be of particular interest to AT&T (NYSE:T) and Time Warner (NYSE:TWX), as well as Bayer (OTCPK:BAYRY) and Monsanto (NYSE:MON).
Tue, Nov. 15, 12:58 PM
- Bayer (OTCPK:BAYRY -0.4%) says it will issue €4B ($4.3B) in mandatory convertible notes as part of measures to fund its acquisition of Monsanto (MON +0.4%).
- Bayer says issuing the notes, set to mature in November 2019, is the first part of ~$19B in previously announced equity capital measures related to the MON acquisition.
- Separately, MON reaffirms in an 8-K filing that it projects FY 2017 EPS of $4.50-$4.90, in line with the $4.72 analyst consensus estimate, and expects its seed and genomics segment gross profit to increase Y/Y by mid-single digits as a percent, with soybean gross profit alone expected to grow by more than 20%.
Thu, Nov. 10, 9:58 AM
- Monsanto (MON -0.3%) says it received EPA approval for its new dicamba-based weed killer designed for its next generation biotech soy and cotton varieties.
- MON says the EPA signed off on its XtendiMax herbicide for in-crop use on Roundup Ready 2 Xtend biotech soybeans, designed to tolerate applications of glyphosate and dicamba, and its Bollgard II XtendFlex cotton, which can tolerate the two chemicals as well as glufosinate.
- While approval was expected, it is considered a major step for the MON's newest herbicide tolerant products amid rising problems in the U.S. farm belt with weeds resistant to glyphosate, the main ingredient in the company's Roundup weed killer.
- MON is still awaiting an EPA ruling on its Roundup Xtend herbicide, a glyphosate and dicamba blend.
Mon, Nov. 7, 5:21 PM
- U.S. state attorneys general have joined a federal antitrust probe of the planned merger between Dow Chemical (NYSE:DOW) and DuPont (NYSE:DD), adding a new risk to the deal's completion, Reuters reports.
- About seven states, including California, have joined the probe of Dow's planned merger with DuPont, according to the report, which adds that some of the state AGs would join an investigation of the proposed merger of Monsanto (NYSE:MON) and Bayer (OTCPK:BAYRY).
- The states are said to be concerned that the companies may raise pesticide and herbicide prices for farmers following a merger, and have less incentive to compete to introduce better and cheaper products.
Thu, Oct. 20, 6:45 PM
- Morgan Stanley (NYSE:MS) stands to collect $120M if Bayer (OTCPK:BAYRY) closes its $57B takeover deal for Monsanto (NYSE:MON), which would be the second-largest deal fee for a single bank on record.
- The big payout is a bright spot in an otherwise down year for M&A activity, as global deal volume YTD currently stands at ~$2.6T, 24% lower than the same period in 2015.
- The payments were disclosed in a MON proxy filing, which also showed the company held takeover talks with three other groups - identified by Financial Times as BASF (OTCQX:BASFY), Koch Industries and China's Sinochem - before agreeing to the pending deal with Bayer.
Thu, Oct. 13, 6:18 PM
- Deere (NYSE:DE) says the Justice Department is unfairly accusing it of trying to monopolize a market that does not exist with its challenge to the planned purchase of Monsanto's (NYSE:MON) Precision Planting seed planting equipment business.
- In August, the DoJ said the proposed deal would mean higher prices for high-speed precision planting equipment; in response, DE takes issue with the Department's definition of "high-speed precision planting system," saying it was vague and ambiguous, and "denies that there is any meaningful economic market consisting of 'high-speed precision planting systems.'"
- The DoJ initially cleared the acquisition in October 2015 but opened a new investigation and filed a lawsuit in August 2016 to block the deal following a protest by an unnamed competitor; DE says the DoJ's case is "designed to protect a competitor, not competition."
Tue, Oct. 11, 10:03 AM
- Bayer (OTCPK:BAYRY -0.2%) has finalized the syndication of a $57B bridge loan to support its acquisition of Monsanto (MON +0.1%), Bloomberg reports.
- A total of 27 lenders joined the 12-month deal including European and Japanese banks, according to the report.
- Bayer is set to buy MON for $66B, with plans to fund the deal with a combination of debt, the issuance of $19B of mandatory convertible bonds and a rights offer.
Wed, Oct. 5, 8:47 AM
- Monsanto (NYSE:MON) -0.4% premarket after reporting better than expected FQ4 earnings and revenues, helped by higher corn seed volumes and lower expenses, but guiding FY 2017 earnings below consensus.
- MON sees FY 2017 EPS of $4.50-$4.90, vs. $4.92 analyst consensus estimate and expects free cash flow of $1.4B-$1.5B, assuming the successful sale of the Precision Planting equipment business and a meaningful first-year investment in its dicamba production facility.
- Despite strong penetration of Intacta RR2 PRO technology and record U.S. corn seed volumes, MON full-year net sales fell Y/Y due mostly to currency headwinds and price declines in agricultural productivity; MON's Seeds and Genomics segment net sales totaled $1.6B for the quarter.
- MON says its continued focus on return on innovation and cost discipline in 2016 sets up a strong base for growth in 2017, where it expects strong cash flows and growth in EPS.
- MON is being acquired by Bayer (OTCPK:BAYRY), with the deal expected to close by year-end 2017.
Wed, Oct. 5, 8:14 AM
Tue, Oct. 4, 5:30 PM
Tue, Sep. 27, 3:58 PM
- Monsanto (MON +0.1%) is upgraded to Neutral from Sell with a $104 price target at Goldman Sachs, joining investors in taking a wait and see approach as evidenced by the significant spread between the current $102 stock price and Bayer's $128 offer price.
- The firm says it does not see any turnaround of prospects at least until 2018, citing cyclical factors weighing farmer economics.
- Yesterday, analysts at Bernstein similarly upgraded shares to Market Perform from Underperform, but advises staying away from the stock for the next 6-9 months, as any of several potential catalysts likely would be negative for the Bayer deal's closing.
- Bernstein believes that as a standalone company, MON is worth ~$80/share, with weak prospects for growth; with a 50% chance of going back to the $80 fundamental valuation if the Bayer merger is scuttled and a 50% of being worth $128, it assigns a new $105 price target.
Wed, Sep. 21, 3:28 PM
- Monsanto (MON +1.3%) is upgraded to Overweight from Neutral with a $128 price target at J.P. Morgan, which believes risk in the shares is "less than what the market assumes," despite regulatory hurdles for its deal with Bayer.
- JPM believes the merger will happen at the $128/share offer share even as other investors gauge the likelihood of success at just 34% probability.
- JPM thinks MON would earn $5/share and sell at ~20x earnings late in 2017, which would work out to $100/share, and given high returns and consistent with historical valuation, the firm sees risk in the shares as $100 and the reward at $128.
Wed, Sep. 21, 2:54 PM
- German lawmakers lashed out in skepticism today at Bayer's (OTCPK:BAYRY -0.9%) planned takeover of Monsanto (MON +1.1%) in a meeting of parliament that highlighted the backlash Bayer faces in its home market against buying a company that many Germans see as a champion of genetically modified crops.
- Eight of the 12 lawmakers who spoke, including three members from within Chancellor Merkel’s coalition, criticized the deal; the lawmakers have no legislative authority to stop the deal, but some are calling on regulators to do so.
- The deal also drew scrutiny at the U.S. Senate Judiciary Committee yesterday, where Sen. Grassley said the deal was part of a "tsunami of consolidation" that could reduce choice and raise the price of chemicals and seed for farmers, which ultimately would affect choice and costs for consumers.
- Company execs - including some from DuPont (DD +0.4%), Dow Chemical (DOW -0.1%) and Syngenta (SYT +0.2%) - sought to allay concerns and reassure lawmakers that they would keep licensing new types of seeds to smaller companies.
Tue, Sep. 20, 7:58 AM
- Bayer (OTCPK:BAYRY) is considering dropping the name of Monsanto (NYSE:MON) in its $66B purchase to avoid sullying its reputation, according to a Bloomberg report.
- While MON is known for making the herbicide Agent Orange used in the Vietnam War and tangling with environmental groups over genetically modified crops, Bayer brought Aspirin to market in 1899 and this year topped a ranking of the world’s most reputable pharmaceutical brands from the Reputation Institute marketing firm.
- Bayer CEO Werner Baumann says there is an opportunity for the companies to jointly “get beyond this image and reputation thing” by building on the trust Bayer enjoys in Europe.
- Bayer should have plenty of time to make a decision: Antitrust reviews in ~30 jurisdictions worldwide mean that the deal is not likely to be completed before late 2017.