Monsanto (MON) Stock Surges on Bayer Takeover Talks

Shares of the Monsanto Company Inc. (MON) were up +12.82 or +14.19 percent to $103.16 in Thursday’s premarket after news that it’s German competitor Bayer AG was considering a potential bid for the company. Monsanto stock closed at $90.34, down -0.84 or -0.92 percent in Wednesday’s regular trading session.

Stock Analysis

Creve Coeur, Missouri based Monsanto Company Inc. was founded by John Francis Queeny in 1901 and was originally a producer of food additives such as vanillin and saccharine.
The company began producing industrial chemicals in the 1920s becoming a major plastics and synthetic fiber producer in the 1940s. Monsanto has since become a multinational agro biotechnology and agrochemical company which has had a long history of controversy due to its biotechnology and chemical products. Monsanto was the first company to genetically modify a plant cell in 1983, and in 1987 began conducting field trials of genetically modified agricultural crops. The company divested a large part of its chemical business between 1997 and 2002 and has since focused on biotechnology.

Monsanto’s principal products are glyphosate herbicides which were developed in 1970 and are currently marketed under the Roundup brand. Monsanto’s other main products are genetically modified crop seeds. The company is also the world’s largest supplier of non-GMO vegetable seed with over 4,000 seed varieties from more than 20 species.

Leverkusen, Germany based Bayer AG was founded in 1863 and originally produced acetylsalicylic acid, which it trademarked as Aspirin. Nevertheless, the trademark was lost in the United States, UK and France as a result of the company’s U.S. assets being forfeit during World War I. The company also trademarked Heroin and marketed the drug as a cough suppressant. The company has since become a major multinational pharmaceutical and chemical company. Bayer is also a major producer of pesticides through its CropScience segment.

According to sources which remain anonymous due to the private nature of the talks, Bayer has been conducting internal discussions and with advisors about making a bid for Monsanto, which has a valuation of almost $40 billion. Bayer has been exploring how to finance a deal that could include a sale of assets.

There has been no final decision on Bayer’s part and the company could still pursue other options including buying assets from Monsanto, a joint venture or other arrangement. Neither company commented on the potential transaction.

Back in March, sources said Monsanto was exploring possible deals with Bayer and its major German competitor BASF SE. The companies discussed a variety of options including the sale of all or part of Bayer’s crop science business to Monsanto, as well as the option of combining both companies. At the time, Monsanto said it was not interested in selling the company to Bayer and that it was more on the acquiring side of a deal.

A merger of the two companies would produce the world’s largest supplier of seeds and farm chemicals and follows last year’s $130 billion deal combining DuPont (DD) and Dow Chemical (DOW). More recently, ChemChina bought Sygenta for $43 billion, further consolidating the industry.

Monsanto stock was up +17.7 percent after news of the potential deal broke this morning, the share price has since declined and the stock is trading just over $100 per share at the time of this writing. While no formal announcement has been made, a bid by Bayer would possibly make BASF consider making an offer for Monsanto.

Other News About MON

Monsanto May Pull Its Biotech Soybean Seeds From Argentina

Monsanto cited difficulty in collecting royalties and the decline in the country’s currency as the main factors for pulling its seeds.

Monsanto cuts forecast for Roundup Ready 2 Xtend soy acres in US

Monsanto has not yet received approval for the GMO seeds in the European Union.

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Published on May 12, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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