Mike, With DuPont getting into the "Life Sciences" business, what do you think about making a play on prospective acquisition targets. Specifically I'm suggesting Pioneer Hy-Bred. After Monsanto's offer for DeKalb, the number two seed company, wouldn't DuPont want to ensure getting a position in the seed business, less someone else decides to preempt them (like Novartis) and go after Pioneer. DuPont already owns 20% of Pioneer.
DeKalb commanded quite a premium even after it ran up after announcing it was available to be acquired. Prior to DeKalb's announcement that it was up for sale it traded in the mid $30's. After announcing, it ran up to $70. The buyout offer was for $100 per share. Based upon the DeKalb buyout offer, I think a comparable offer for Pioneer would fetch between $75-100. It closed Friday slightly over $38 per share.
The "Life Sciences" concept seems to be in vogue. Monsanto, Novartis and latecomer DuPont have seen the earnings potential in agrotech, food, and pharmaceuticals, as compared to the cyclical stodgy chemical earnings. I've even heard lately that Dow is considering the concept, and Pfizer may be interested in Monsanto.
While DuPont and others are on an acquisition hunt, valuations in this sector should hold their premiums.
Perhaps out of the money calls would be a good play, though speculative.
Regards,
Bob |
