Piper Jaffray Sees Renewed Monsanto (MON) Bid for Syngenta (SYT) Near Start of 2016

DuPont and Dow are now officially combining and Piper Jaffray analyst, Brett Wong, thinks further consolidation is coming with Monsanto (NYSE: MON) likely to renew the pursuit of Syngenta (NYSE: SYT) towards the beginning of the year. Piper thinks a renewed bid for Syngenta would be viewed negatively by investors as management would likely postpone repurchases not re-upping the nearly completed authorization, which is a key growth driver in the out years, as well as the potential to be bid-up with ChemChina in the mix.

A tax inversion is now more difficult making it is likely the deal would not be accretive in the first year. That said, Piper still believes that building-out a crop chem business is positive longer-term, specifically through R&D synergies. If MON is unable to acquire a proprietary chem business, it may look to generics or be a bidder for the divestitures off of other consolidation, including potentially more pronounced divestitures from the DD & DOW merger.

Based on the same previous ~$47B offer from Monsanto it is difficult for the deal to be accretive in the first year without the tax inversion. Building-out a crop chem business would be positive and drive growth longer-term but shares could be pressured near term.

Although the analyst is clearly talking up the risks of the investment, there is no formal reduction in the Outperform rating or $113 PT.