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
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.
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, 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.
Mon, Sep. 19, 7:21 AM
- Bayer (OTCPK:BAYRY) plans to meet with banks this week as it works on a $57B bridge loan backing its proposed takeover of Monsanto (NYSE:MON), Bloomberg reports.
- BofA, Credit Suisse, Goldman Sachs, HSBC and J.P. Morgan agreed to provide bridge financing, and talks tomorrow will form part of the syndication of the loan agreed between lenders and the company, according to the report.
- Bayer last week agreed to buy MON for $66B and plans to fund the deal with a combination of debt, the issuance of $19B of mandatory convertible bonds and a rights offer.
Thu, Sep. 15, 2:18 PM
- Monsanto (MON -1.9%) moves lower, slipping nearly 20% below Bayer's (OTCPK:BAYRY -1.8%) $128/share offer price, amid doubts about the limited business overlap, potentially lowballed terms and significant closure risk.
- CLSA downgrades MON Underperform with a $110 price target, citing disappointing deal terms and a far higher regulatory risk than both management teams suggest; the firm also notes that the offer price is less than 10% higher than where the stock traded two years ago, and says the $2B breakup free is a "fraction" of what MON offered in its pursuit of Syngenta.
- Piper Jaffray keeps its Overweight rating on MON while lifting its price target to the $128 offer price, which it says was lower than expected; the firm pins its approval conviction on the "minimal crossover" between the two companies, while admitting that MON's remarks about Bayer as the best option for shareholders raises doubt about the company's growth expectations.
- BMO keeps his Outperform rating and lifts its target to $128, echoing that product overlaps are small and that the deal will be closely scrutinized across the globe given the practical realities of farmer wallet impact, the companies involved, and ongoing reviews of the Dow-DuPont and ChemChina-Syngenta tie-ups, adding that MON could trade sideways for weeks or even months.
Wed, Sep. 14, 12:19 PM
- Monsanto (MON +1.3%) is higher after Bayer (OTCPK:BAYRY +1.2%) finally clinched its $128/share takeover, but the stock still trades at ~$107 amid some doubt that the deal actually will happen.
- Bernstein analysts anticipate significant anti-trust and political hurdles, and assign just a 50% probability of that the deal will be completed, citing conglomerate antitrust concerns as a large integrated crop protection and seeds company, U.S. national security concerns from a CFIUS review; and other political concerns, such as Sen. Grassley's hearing later this month on agriculture consolidation.
- The proposed merger likely will face an intense and lengthy regulatory process in the U.S., Canada, Brazil, the EU and elsewhere; MON CEO Hugh Grant said in today's conference call that the companies will need to file in ~30 jurisdictions for the merger.
- Bayer’s cottonseed, canola seed and glufosinate herbicide businesses, with sales totaling ~$1B, may need to be divested, according to a Bloomberg analysis.
Wed, Sep. 14, 7:28 AM
- It's official: Bayer (OTCPK:BAYRY) agrees to acquire Monsanto (NYSE:MON) for $128/share in cash, in a deal that values MON at ~$66B.
- The offer represents a 44% premium to MON's closing share price on May 9, the day before Bayer's first written takeover proposal.
- Bayer expects annual synergies of ~$1.5B after year three; plus additional synergies from integrated solutions in future years.
- Bayer has committed to a $2B reverse antitrust break fee, reaffirming its confidence that it will obtain the necessary regulatory approvals.
Tue, Sep. 13, 6:47 PM
- Bayer (OTCPK:BAYRY) is expected to announce the acquisition of Monsanto (NYSE:MON) tomorrow for more than $66B, Reuters reports.
- The breakthrough after more than four months of talks reportedly comes after Bayer further improved on its sweetened offer of $127.50/share in cash it disclosed last week, but the deal will still value MON at less than $130/share.
- After MON's board approves the deal today, Bayer's board will meet tomorrow to also authorize the deal, with the goal of an announcement before the stock market opens in New York, according to the report.
Tue, Sep. 13, 11:14 AM
- Monsanto's (MON -1%) board will meet today to decide whether to approve the company's sale to Bayer (OTCPK:BAYRY -1%) for more than $65B following four months of negotiations, Reuters reports.
- The deal is expected to value MON at a little more than the sweetened $127.50/share offer that Bayer disclosed last week, according to the report.
- Bayer's supervisory board reportedly will review the deal tomorrow, and the deal still could hit a snag with the board of either company.
Fri, Sep. 9, 9:47 AM
- Bayer, Monsanto deal likely to be announced late next week; price for Monsanto seen to be in high $120s, sources say.
- Still negotiating on regulatory issues.
- Source: CNBCNOW
Thu, Sep. 8, 2:11 PM
- Monsanto (MON +1.3%) moves higher following a Bloomberg report that Bayer (OTCPK:BAYRY) is exploring the sale of its dermatology business, as the German company seeks to sell peripheral businesses to boost its pursuit of MON.
- The business could attract interest from existing makers of skincare products such as Nestle’s (OTCPK:NSRGY, OTCPK:NSRGF) Galderma, Allergan (NYSE:AGN) and Almirall (OTC:LBTSF) of Spain, as well as P-E firms, according to the report.
- Analysts say a sale of the unit could fetch more than €1B ($1.1B).
Tue, Sep. 6, 10:25 AM
- Bayer (OTCPK:BAYRY +1.5%) and Monsanto (MON +0.5%) are within a week or two of closing on a deal, with MON telling Bayer that it is "close" on price, CNBC reports.
- MON also has agreed to open its books for Bayer to conduct due diligence checks on the company's business, Reuters reports.
- However, the two companies have yet to agree on a strategy on how to jointly tackle potential antitrust challenges, according to the CNBC report.
- Bayer has raised its bid for MON to $127.50/share, up from $125, but analysts disagree whether the offer is final; the Equinet brokerage says it infers from Bayer's statement that "failure to agree a deal at $127.50/share could imply a risk to Monsanto shareholders of either a hostile bid at a lesser consideration, or no deal at all," while analysts from Baader Helvea "still expect a bid per share in the $130-135 range before Monsanto comes to the table."
Tue, Sep. 6, 8:11 AM
- Bayer (OTCPK:BAYRY) shareholder Jupiter Fund Management says the German company's potential takeover of Monsanto (NYSE:MON) represents significant risks for shareholders.
- Greg Herbert, co-manager of the Jupiter Global Equity Income Fund, tells Reuters that the new deal terms are "probably getting closer to succeeding" but the revised terms do not change his view that the deal presents significant risks.
- Bayer sweetened its offer for MON to $127.50/share from $125 to take the deal value to more than $65B.
Mon, Sep. 5, 10:35 PM
- Bayer (OTCPK:BAYRY) says it is has sweetened its takeover bid for Monsanto (NYSE:MON) to $127.50/share, up from its previous offer of $125, provided that a negotiated deal can be reached.
- The latest offer, which values MON at ~$56B excluding debt, falls short of the $135-$140/share some analysts have predicted that Bayer would need to pay to secure a deal.
- MON shares closed Friday at $107.44; Bayer fell 0.7% lower Monday at €94.24 (~$105).
Wed, Aug. 31, 12:21 PM
- "DOJ's allegations about the competitive impacts of the transaction are misguided," says Deere (DE -1.1%), and the companies intend to vigorously defend the deal.
- Previously: U.S. moves to block Deere's deal for Monsanto's Precision Planting (Aug. 31)
- Competition in precision agriculture is strong and growing, argues Deere, and its purchase of Monsanto's (MON -1.4%) Precision Planning will enable broader access to technological advancements.