Talking 'Monsanto-Syngenta Chatter 2.0' With This Street Analyst

In a report published Monday, Miller Tabak & Co analyst Tim Tiberio said that the strategic rationale of the merger between Syngenta AG (NYSE: SYT) and Monsanto Company (NYSE: MON) has grown since 2014, although there are still "elevated transaction risks."

Miller Tabak & Co, which has a Hold rating on Monsanto, with a price target of $122, believes that there is potential to become "more constructive on MT accretion scenario."

Tiberio maintained a Buy rating on Syngenta, while raising the price target from $74 to $80. "In our view, $1.5bn in synergies could be extracted from a potential MON-SYT combination. As such, our fair take-out value of $90/ADR is derived by applying an EV/EBITDA multiple of ~10x to an adjusted Syngenta EBITDA run-rate of $4.2bn ($2.7bn baseline vs. current consensus of $2.9bn + $1.5bn in synergies)," the analyst added.

Monsanto has had a strategic interest in Syngenta and the latter's CEO has even more incentive to close the deal in 2015. Therefore, there seems to be "a strong chance" that Monsanto is giving Syngenta another look. However, there are "sufficient hurdles" to a deal being closed to assign the probability "of a successful deal at 40/60."

Tiberio believes that the press chatter has resulted in "more fire than smoke" and that "real hurdles remain for a final deal."