Monsanto Cheap Ahead of Bayer Deal
We think the market's skepticism that regulators will approve the tie-up is unfounded and that an opportunity has emerged in Monsanto shares.
Jeffrey Stafford: With Bayer's announcement in mid-September it had agreed to acquire Monsanto for $128 per share, multiple ag deals now sit in front of regulators for approval. In addition to the Monsanto-Bayer tie-up, Dow and DuPont have agreed to merge, and Syngenta has accepted a takeout offer from ChemChina. With three big seed and crop chemical deals on the table, anti-trust scrutiny is likely to heat up.
Still, we think it's more likely than not that all these deals will eventually receive regulatory approval. This view is based on the general lack of product overlap between the companies involved and our belief that selling seeds and crop chemicals together is not a path to increasing competitive advantage. We also think there will be more than enough competition among the remaining players to foster future industry innovations. We expect relatively minor divestitures will appease regulators in areas where product portfolios are sufficiently similar. For example, we think Bayer will likely divest its small seeds business to prevent overlap with Monsanto's industry-leading position in seeds.
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