MorphoSys, Osino Resources, Bayer - Profits through takeovers

MorphoSys - From one low to the next

As recently as August of this year, Manager Magazin brought a takeover of MorphoSys into play. If you look at the current figures, you quickly understand why. The Company and one-time biotech darling paid USD 1.7 billion to acquire Constellation Pharmaceuticals. At the time, MorphoSys' share price was still above EUR 79, and by then, it was already struggling with the transformation from biotech to a pharma company. Last Friday, the price per share was only EUR 35.18. The market capitalization of the entire group is thus EUR 1.2 billion, about EUR 300 million below the purchase price for Constellation.

CEO Jean-Paul Kress told Manager Magazin, "The market needs time to understand the new direction." However, the market mainly does not understand the transaction's financing, as a large part of the secure licensing income was pledged. But even positive news, such as exceeding analysts' expectations in the third quarter, or positive results from studies, could not slow down the continuing downward trend. The lower the share price falls, the more attractive a takeover of MorphoSys becomes.

On November 23, the share marked a new multi-year low and thus a sell signal. At least the EUR 32.90 mark has been recovered so far. To break the downward trend, a closing price above EUR 43.29 is needed. Currently, one should wait for the break of the downward trend before considering an investment.

Osino Resources - Successful capital increase

The management of Osino Resources already has experience with acquisitions. In 2011, Auryx Gold Corp. was sold to B2 Gold for USD 160 million. A similar scenario could occur with Osino. Currently, the stock trades at just 0.3 times its net asset value, making it an attractive takeover target for major gold producers. Even without a takeover, the share has a high catch-up potential compared to its peer group due to its current undervaluation.

The Canadian gold explorer focuses on the Twin Hills project in Namibia, where conditions for mining projects are very good. In April, the initial resource estimate was for 430,000 ounces of gold and inferred resources of 1.47 million ounces of gold. The July initial economic analysis (PEA) certified the project as having a 15-year life at an average annual production of 99,000 ounces of gold. The Company continues to explore the area on an ongoing basis and, on November 1, successfully raised 10.5 million Canadian dollars (CAD) through a private placement at CAD 1.10. These funds will be used to finance upcoming exploration in the area.

In September, the Company applied for a mining license and provided an update on the project. There has been significant progress in planning the infrastructure for a mine, and they currently have 8 drill rigs in operation. They expect to have 110,000m drilled by December and are still awaiting results from drilling. The stock broke its downtrend on November 9 and has formed an uptrend that will not be broken until below CAD 1.08 on a closing basis. The stock has also declined with the falling gold price in recent days and is currently trading at CAD 1.20. The analysts at Sprott Equity Research see the fair value of the stock currently at CAD 2.55.

Bayer - Upward trend broken

DAX company Bayer still has problems today due to its Monsanto acquisition, which cost USD 63 billion. It was the largest takeover of a German company abroad. One of the reasons for the takeover at the time was the fear of being taken over themselves. The supposed rescue by Monsanto could now prove to be a boomerang. The lawsuits that have been going on for years due to glyphosate and PCBs are putting more and more pressure on the group. As recently as November 11, Bayer suffered another bankruptcy in US courts.

The current market capitalization of the Bayer Group as a whole is EUR 44.7 billion. If we add the net financial debt of around EUR 34 billion, we arrive at a total value of EUR 78.7 billion. Not so long ago, the market value excluding Monsanto was still over EUR 100 billion. No wonder that rumors keep coming up that hedge funds are interested in taking over the helm at the group and splitting it up into its three divisions. So far, however, they are rumors.

The stock formed a slight uptrend since September 20. However, it has now been sold off since the news of the PCB ruling on September 11. With the news regarding a new Corona mutant last Friday, the stock broke the uptrend it had just formed. The next support is at EUR 44.47. If this does not hold, a test of the EUR 40 mark becomes increasingly likely.

Takeovers are possible for all three companies. Bayer and MorphoSys have not done themselves any favors with their takeovers and, in turn, could now become targets. Osino Resources, on the other hand, has proven gold deposits and is steadily developing the project. Investors can wait for the next resource estimate, which is expected to be higher than April.