Why Monsanto Stock Popped Yesterday

Monsanto (MON) stock surged on April 9, 2018, following news that the U.S. Department of Justice approved the merger with Bayer. The deal is one of the largest mergers in the agribusiness sector (MOO).

The U.S. Department of Justice approved the Bayer-Monsanto deal on the condition that the companies sell their assets. The requirement raised authorities’ antitrust concerns, according to a report by the Wall Street Journal.

On March 21, the merger received approval from antitrust watchdogs in the European Union. However, the approval came due to Bayer offering to divest its assets—similar to the requirements from US antitrust authorities. According to the European Commission, Monsanto and Bayer are two companies among a handful of players that have the ability to develop new solutions in the agribusiness field.

The deal was valued at $57 billion or $128 per share of Monsanto. Regulatory overhang pressured the stock to trade well below the offer price. While the merger received approval from most of the countries in the past, US approval might have weighed heavily on Monsanto’s price before the offer price. The company’s share price increased after it received approval from the U.S. Department of Justice.

Following the mergers of DowDuPont (DWDP), Syngenta (SYT) and ChemChina, and PotashCorp and Agrium (NTR), the agribusiness sector has consolidated.

Next, we’ll discuss the recent approval in more detail.