The fact that shares of both companies have traded lower since their announced marriage suggests growing skepticism that the deal stands a chance of closing. But that was before President-elect Donald Trump's surprise victory for the White House. According to Evercore ISI’s Head of Political Analysis Terry Haines, Trump's pick of Senator Jeff Sessions for the role of attorney general suggest that the heavy regulatory scrutiny seen under the Obama administration could lighten up. (See also: How Trumponomics Might Boost the Stock Market.)
"Sessions' likely nomination and confirmation by the Senate, in which he has served since 1997, is a market positive for merger and acquisition activity," Haines wrote on Friday. "Sessions as attorney general would shift immediately from the current mostly ‘red light' Obama antitrust/competition policy and move towards one that would be friendlier to M&A activity."
The $66 billion deal between Bayer and Monsanto, which valued Monsanto at $128 per share, will be decided upon by U.S. and European regulators some time in 2017. The fact that the deal would create the world's largest maker of seeds and pesticides, which would control close to a 30% share of the seeds market and 24% in pesticides, has raised the eyebrows of several U.S. regulatory officials. With Sessions in office, Haines believes those eyebrows will be lowered. (See also: EU Regulators Delay Multiple Agrochemicals Mergers.)
As attorney general, Sessions would not only head the Justice Department, he would also be responsible for enforcing antitrust laws and for prosecuting white-collar crimes, among other tasks. Haines thinks that Sessions won't automatically equate larger companies with trouble for competition. Sessions may decide, "that no reflexive test for the disapproval of a merger should be applied, as Obama regulators did with their 'no four into three' doctrine," Haines wrote.
Monsanto shares, which have risen more than 4% since Trump won the election, closed on Friday at $101.21. The stock has risen 2.73% year to date, trailing the 6.75% rise in the S&P 500 (SPX) index. (See also: Why Monsanto Trades 23% Below Bayer Offer Price.)