More Squawk From Jim Cramer: Monsanto (MON) ‘Needs Scale,’ But Bayer Deal Uncertain

Monsanto (MON) may need to grow its business, but the current regulatory environment makes it hard to know if an acquisition by Bayer (BAYRY) is possible, according to Jim Cramer.

Author:: Amanda Gomez
Publish date:: May 12, 2016 1:15 PM EDT

Updated from 10:58 AM EDT

NEW YORK (TheStreet) -- Monsanto (MON) stock is gaining 8.74% to $98.24 in afternoon trading on Thursday after reports from Bloomberg suggested Bayer (BAYRY) is exploring a potential offer for the St. Louis-based seed and chemicals company.

"Monsanto may need some scale," TheStreet's Jim Cramer said on CNBC's "Squawk on the Street" this morning. "This kind of deal would give them that."

Monsanto, which has a market value of almost $40 billion, could benefit if the German company offers to buy the company, but any deal could face regulatory hurdles.

Cramer warned viewers that "this is the most active anti-trust" environment he's ever seen, making it hard to know if a deal could be approved in the U.S. or Europe.

"I have no certainty that you can make a deal in any industry," he commented.

Cramer explained that DuPont (DD) and Dow Chemical (DOW), which agreed to a merger and then split into three companies, have been very confident that the deal will create the top seed company in the world.

The management of both companies have told Cramer that farmers want this transaction to be completed, but he is uncertain since the Halliburton (HAL) and Baker Hughes (BHI) deal was blocked due to concerns that merger between the oilfield service providers would hurt oil companies.

Cramer also cautioned viewers about investing after merger and acquisitions reports like the speculation surrounding Monsanto because "if nothing happens, the stock goes down."

"I never recommend a stock on a take-over basis if I'm concerned about earnings," Cramer added in the above video. "In the short term, I am concerned about Monsanto's earnings."

Separately, Monsanto has a "hold" rating and a letter grade of C+ at TheStreet Ratings because of the company's expanding profit margins and notable return on equity, which is offset by generally disappointing stock performance, feeble earnings per share growth and generally higher debt management risk.

You can view the full analysis from the report here: MON

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.