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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Handquarters.

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Speaker 1: I'm Charlie Pelot. Stocks are drifting higher. We've got the

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Speaker 1: SMP five hundred index up one tenth of one percent.

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Speaker 1: A little change there, up two points one eight two

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Speaker 1: right now on the SMP. Dow Jones Industrial Average also

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Speaker 1: up by one tenth of one percent, up twenty points

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Speaker 1: to eighteen thousand, five hundred twelve, and Nastack is up

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Speaker 1: fifteen points, a gain of three tenths of one percent.

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Speaker 1: The tenure up nineteen thirty seconds had yield one point

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Speaker 1: five four percent. Gold up two percent, up ninety the

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Speaker 1: ounce the thirteen fifty, and crude oil is up five

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Speaker 1: tenths of one percent of twenty four cents of barrel

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Speaker 1: now forty four sixty eight on West Texas Intermediate Crude.

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Speaker 1: I'm Charlie Pellet. That's a Bloomberg Business flash. You're listening

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Speaker 1: to taking Stock with Kathleen As in Pimpbox on Bloomberg Radio.

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Speaker 1: The shares of Monsanto are down about one percent today.

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Speaker 1: Is comes after buyer or Bear lifted its offer from

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Speaker 1: Monsanto to a hundred and twenty seven dollars and fifty

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Speaker 1: cents a share. That that compares to its previous offer

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Speaker 1: of about a hundred and twenty five dollars a share

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Speaker 1: that was in July, and the current bid values Monsanto

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Speaker 1: at over sixty five billion dollars. This includes debt. Here

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Speaker 1: to tell us more about this potential deal is Jonas

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Speaker 1: ox Guard. He is equity analyst for chemicals at Sanford Bernstein. Jonas,

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Speaker 1: thanks very much for being with us. Why does buyer

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Speaker 1: want Monsanto so much? Oh, that's a standard response to

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Speaker 1: week margins in the industry. So we're we're coming off

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Speaker 1: this high peak where the ag economy was booming. Farmers

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Speaker 1: made money hand or fist, and that translated to high

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Speaker 1: margins for the input companies. That's passed right now in

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Speaker 1: a vironment where volumes are flat, prices are flat negative

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Speaker 1: and well, the way to grow your earnings then is consolidation.

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Speaker 1: So there you have it. Now, how about the price

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Speaker 1: before we get into exactly what buyer or a bear

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Speaker 1: will get out of this. Uh, if they win this

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Speaker 1: this battlety versus a hundred and thirty, that's what our

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Speaker 1: our Bloomberg reporters are seeing is sort of the floor

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Speaker 1: from mont Santo. Is that such a big difference that

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Speaker 1: this can't be settled. I think that if mont Santo

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Speaker 1: had said, you know what, one thirty will make a

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Speaker 1: sign on the dotal line, they would be there by now.

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Speaker 1: I'm guessing that mont Santo is is thinking a bit

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Speaker 1: higher than that, and there's a sufficeable gap to be bridged.

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Speaker 1: Can you tell us what areas are there that both

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Speaker 1: companies have overlapped, because this is going to be a

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Speaker 1: regulatory hurdle both in the United States and in Europe

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Speaker 1: to get over What are some of the businesses that

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Speaker 1: are duplicative and also that might have to be sold

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Speaker 1: or spun off in order to get that kind of

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Speaker 1: regulatory approval. Yeah, there's actually not that much duplication between

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Speaker 1: the two. Montsanto is primarily a seed company. They're one

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Speaker 1: chemical is really glyfeu say, it's a very specific chemical

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Speaker 1: they're they're they're primarily a crop protection company for protection

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Speaker 1: meaning insecticides, pesticides, and also chemicals, and they do have

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Speaker 1: a seed arm, but it's fairly small. It's also very

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Speaker 1: focused on some of the smaller crops that the big boys,

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Speaker 1: so Monsanto DuPont, that they didn't really bother with initially.

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Speaker 1: So Bear is big in in cotton and canola. Montsanto

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Speaker 1: is big in corn and soybeans. They do have some

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Speaker 1: cotton sales and they're starting to get into canola, so

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Speaker 1: the overlap is fairly small. They will probably have to

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Speaker 1: divest some of the cotton business, probably have to invest

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Speaker 1: the emerging kennola business from one Santo. There might be

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Speaker 1: some smaller chemicals, but overall, um, it's not really a

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Speaker 1: big deal on the technical front. Now that all said,

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Speaker 1: I think that there's a political angle to this that

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Speaker 1: makes the deal a lot harder to get past regulators. Um,

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Speaker 1: these are two of the largest input providers and agg

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Speaker 1: inputs meaning seeds and crop protection chemicals. Those make up

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Speaker 1: about of the farmer's cost. So these are major inputs

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Speaker 1: right in the farm economy. So if you have two

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Speaker 1: companies joining, that makes them the by far the biggest

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Speaker 1: player in the space. Well, the farmers are taking notice.

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Speaker 1: Farmer lobbies have already been pushing back. We've seen politicians

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Speaker 1: start to pay attention to a crafty. For example, he's

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Speaker 1: calling for a Senate hearing sometime later this month, and

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Speaker 1: so we will see how that goes. Okay, Well, you know,

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Speaker 1: uh what about are there any liabilities? I guess not,

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Speaker 1: because obviously Buyer wants Monsanto. Monsanto has been in many

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Speaker 1: situations already. I mean, it produced PCBs which turned out

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Speaker 1: to be highly toxic until the late nineties seventies, when

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Speaker 1: it was made so obvious that they were bad that

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Speaker 1: they had to stop making them. Now there's this this

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Speaker 1: herbicide decomba misuse camp complaints that some people are accusing

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Speaker 1: Monsanto of engineering months and that, of course we didn't

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Speaker 1: do anything like that. Is there a point where Monsanto,

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Speaker 1: especially in Europe where they're so against genetically modified foods?

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Speaker 1: Is there any point where Monsanto has is a bit

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Speaker 1: of a liability for whomever requires them? Ah, there was

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Speaker 1: a string of fairly bad news a while ago, but

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Speaker 1: that was actually predating Buyer's bits. They clearly knew about

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Speaker 1: all these things before they made the bit of the

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Speaker 1: first first case. Um, most of that reputation as learned,

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Speaker 1: I mean the day cam By issue. In all fairness

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Speaker 1: of Monsanto, they didn't actually have anything to do with that, right.

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Speaker 1: This is farmers who applied I cam by illegally. Um,

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Speaker 1: there's not much that Monsanta can do about it, not

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Speaker 1: about high debt levels that might be incurred if this

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Speaker 1: deal is concluded. Yeah, so this it's a massive deal

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Speaker 1: right at sixty plus billion. And the main motivation perhaps

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Speaker 1: is that bear can borrow money at two and a

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Speaker 1: half percent interest, give or take, and at two and

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Speaker 1: a half percent interest, almost anything is a creative. Now,

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Speaker 1: if you borrow at billion or so, then yeah, you

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Speaker 1: you load up quite a bit. Um ends up being

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Speaker 1: fairly close to that four times the bit level that

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Speaker 1: companies typically start feeling uncomfortable with, and so they're gonna

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Speaker 1: spend quite some time paying that off. But Joanna, it's

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Speaker 1: just been a quickly before before we finish. If buyer

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Speaker 1: doesn't succeed in this, who else would buy M on Santa?

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Speaker 1: Who would be at the top of your list? I

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Speaker 1: honestly don't sure there is anyone who is in position

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Speaker 1: to buy it. BAF is the only other real candidate.

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Speaker 1: There might be some Chinese conglomerates also wants to break in,

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Speaker 1: but I doubt that good past political pressure. So really

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Speaker 1: no one out there. Okay, Well, we shall see Jonas Oscar,

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Speaker 1: Thank you so very much. He's chemicals equity analyst at

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Speaker 1: Sanford Bernstein, Quoted in our Bloomberg story Today in Fact,

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Speaker 1: written by Lidia mulvaney and Chietris Somanyaji, about the sweetened

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Speaker 1: buyer bid for mont Santa, the regulatory challenges, the farmers

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Speaker 1: getting a little bit nervous. This is all very interesting

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Speaker 1: for this deal. This is Bloomberg coming up on taking

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Speaker 1: stock of Volksfacin's truck division is acquiring a nearly seventeen

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Speaker 1: percent stake in Navistar International, the German automaker looking to

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Speaker 1: gain a foothold in the North American heavy duty truck

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Speaker 1: market