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Why Shares of Monsanto Company Popped 11.6% Today

Image source: Monsanto.

What: Shares of seed maker Monsanto Company (NYSE: MON) jumped as much as 11.6% in early trading Thursday after buyout rumors emerged. By 11:30 a.m. ET, the stock had settled to a more modest 9.1% gain.

So what: Reuters and Bloomberg are reporting that Bayer and BASF have been looking into buying Monsanto for several months, but nothing has been completed because of valuation concerns. Dow Chemical and Dupont are combining in part to build a bigger agriculture business. Monsanto also pursued Syngenta to add to its own chemicals business.  

Now what: Right now, this is just conjecture in the market, and given all of the merger speculation surrounding Monsanto in recent years, I wouldn't read too much into it. But it does make some sense for seed, chemical, and agriculture technology companies to combine, giving farmers a one-stop shop and potentially better performance. For the companies, that setup may also bring higher margins as well.

With that said, I don't think it's time to change your investment thesis on Monsanto given today's rumors. If a buyout happens, it could be a nice boost, but betting on merger activity is risky and I'd rather own the stock on its own fundamentals, which haven't changed a bit today.

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