Morgan Stanley says Corteva may want to get out in front of ag landscape changes

After The Wall Street Journal reported that Corteva (CTVA) was considering separating its seed and crop chemicals businesses, Morgan Stanley said the firm was surprised on one hand as this is “the first socialization of such an idea that we are aware of,” but also not surprised as a key tenet of the firm’s bull case has been a positive re-rating for the seed business within the existing Corteva corporate structure. Motivation for the potential separation may include shielding seeds from any future crop chemical liabilities; potential for “a dealmaking wave in agriculture not seen since the first Trump administration”; and BASF (BASFY) intending to IPO its agriculture business in 2027, according to the analyst, who views the third reason as “the most compelling reason to contemplate a separation.” BASF’s planned IPO for its agriculture business in 2027, as well as a potential separation of Bayer’s (BAYRY) agriculture business at some point assuming the glyphosate litigation can be appropriately derisked one way or another and/or an IPO of Syngenta, could change the competitive landscape in the equity market and the firm can see why Corteva “may want to get out in front of it” if the agriculture equity landscape may indeed change in the coming years, adds the analyst, who has an Overweight rating and $84 price target on Corteva shares.