NEW YORK (TheStreet) -- Shares of Monsanto (MON) were higher in late-morning trading on Wednesday as Bernstein analysts said the St. Louis-based agricultural products supplier's $66 billion deal with German chemical and pharmaceutical company Bayer (BAYRY) still faces significant anti-trust hurdles.
Bernstein said the challenges are steep enough that there's an approximately 50% chance the deal will go through, according to Barron's. Monsanto's nearly $107 stock price suggests that the market also agrees with that perspective, the firm added.
"Monsanto seems more confident as they have accepted a reverse break fee of 'only' $2 billion (3% of offer EV)," Bernstein said in an analyst note. "Our concerns on antitrust of direct product overlap are likely resolvable with divestments (we estimate assets sales up to $1.2 billion from cotton & canola seeds, glufosinate herbicide and trait)."
Monsanto faces conglomerate antitrust concerns because it's a large integrated crop protection and seeds company, Bernstein noted. Additionally, U.S. Senator Chuck Grassley is holding a hearing on Sept. 20 about agriculture consolidation, which could generate political discussions on the merger.
Bernstein said it views Monsanto as a "wait and see" story, maintaining its "underperform" rating on the stock.
The firm doesn't see material upside or downside to Monsanto's current stock price of approximately $107, but is remaining on the sidelines for the time being regardless.
Separately, 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 articles's author. TheStreet Ratings has this to say about the recommendation:
TheStreet Ratings team rates Monsanto as a Hold with a ratings score of C+. The primary factors that have impacted the rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and solid stock price performance. However, as a counter to these strengths, it also finds weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk.You can view the full analysis from the report here: MON