With Monsanto’s rejection of Bayer’s $122/share acquisition offer the ball isnow squarely back in Bayer’s court. While Monsanto has left the door open tobeing acquired, stating it is open to “continued and constructiveconversations”, it has also established a high bar, noting that Bayer’s$122/share proposal was “financially inadequate”. We believe this statement isconsistent with our belief that if Monsanto were to be acquired, the Monsantoboard would seek a price of ~$150/share. At this price Monsanto would bevalued at 16.4x ’17E EBITDA roughly equivalent to the 16.8x ’16E ChemChinais paying for Syngenta (Buy, CHF 394.7).

　　If Bayer (Buy, CP- EUR 84.4) were not successful in acquiring Monsanto andterminated its offer, we believe Monsanto’s shares would decline, but not tothe $90/share price level that existed prior to press reports that Bayer (andBASF) were considering bids for Monsanto. This is because we believe Bayer’sbid has highlighted the significant intrinsic value of Monsanto. As such, webelieve Monsanto shares would trade back to around $100/share in the shorttermfollowing a termination of Bayer’s offer.