Monsanto (MON) Takeout Unlikely - Jefferies

Monsanto (NYSE: MON) confirmed an unsolicited offer from Bayer (BAYN), without disclosing terms. Jefferies analyst, Laurence Alexander, believes a transaction is still relatively unlikely (<25%), but expects the disclosure to be a near-term positive for shares in Monsanto, Novozymes (NZYMB) and FMC (NYSE: FMC), and negative for BASF (BAS), Syngenta (NYSE: SYT) and DuPont (NYSE: DD).

The analyst believes that Monsanto will object to the offer, given its conviction (more adamant than the street's belief) in its R&D pipeline and longer-term competitive advantages. The current target of a mid-teens CAGR implies calendar 2019 EPS of ~$7.70, which on a 1.5x PEG ratio would imply a $169 stretch value, or $127 this year if discounted at 15%. Believing the prior targets would have supported a path to $10 in EPS and a stretch target >$250, and >$189 this year on a 15% discount rate. Rejection appears highly likely.

The firm maintained a Hold rating and price target of $95.

For an analyst ratings summary and ratings history on Monsanto click here. For more ratings news on Monsanto click here.

Shares of Monsanto closed at $97.13 yesterday.

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