It has been a good period for long-suffering investors in German conglomerate Bayer (DE:BAYN). <\/p>\n
The share price has risen by close to 25 per cent over the past month, as investors sensed that an end to the longstanding litigation over weedkiller Roundup may finally be in sight. <\/p>\n
A court victory at the end of June means the class settlement already agreed will probably be the end of the Roundup payouts, with a further August hearing set to confirm the $7.25bn (\u00a35.4bn) payout plan, which would be handed out over a period of up to 21 years. <\/p>\n
However, what also appears to be driving the buying is a growing expectation that management will look seriously at divesting part of the sprawling conglomerate.<\/p>\n
That speculation grew after Bayer announced the consolidation of its US glyphosate business into a new entity, Ruveon, based in St Louis but still within the Bayer Group.<\/p>\n
Management framed the move as part of a five-year improvement plan for the crop science division rather than a straightforward divestment. A complete divestment would separate the Monsanto purchase from the rest of the group and bring the saga of the original $63bn takeover to an end.<\/p>\n
Despite official denials, the impression remains that Bayer is fattening up crop science for sale, a proposition that analysts are taking seriously.<\/p>\n
Read more from Investors\u2019 Chronicle<\/p>\n
Deutsche Bank analyst Tristan Lamotte said: \u201cWith the litigation looking to be contained and business fundamentals improving following a successful transformation, we believe a break-up of the portfolio to unlock value is a question of when and how, rather than if.\u201d<\/p>\n
Lamotte reckons there are at least two possible scenarios management could follow to achieve a desirable outcome.<\/p>\n
Firstly, the company could divest the crop division, without the glyphosate business, at the point when a stronger IPO market makes that option viable \u2013 the number of US IPOs is currently running about 9 per cent ahead of the same point in 2025, according to data compiled by Stock Analysis.<\/p>\n
Secondly, the Deutsche analyst reckons Bayer could sell its consumer healthcare business, which sells a full menu of hangover treatments such as Alka-Seltzer and Rennie, and invest the proceeds in the company\u2019s higher-growth pharmaceuticals division.<\/p>\n
Bayer has also been trying to reactivate its research pipeline as part of its turnaround plan. Controversially, this has included radically reducing the number of middle managers in the pharmaceuticals division and making individual teams responsible for bringing products through. The latest pipeline update lists a total of 30 products currently in development.<\/p>\n
Any of these actions could help lift the estimated 20 per cent conglomerate discount currently being applied to the share price. Deutsche estimates that these moves could yield a final price of \u20ac84 (\u00a372) a share, around 40 per cent above the broker\u2019s current target.<\/p>\n
The end of Roundup litigation<\/p>\n
None of this would be plausible, though, without the end of Roundup litigation. Indeed, investors breathed a sigh of relief at the end of June after Bayer persuaded the US Supreme Court that federal law should take precedence over lawsuits filed in individual states related to Roundup.<\/p>\n
This means plaintiffs looking for bigger payouts from local courts could turn to the federal class action, although Monsanto had set an early June deadline for \u201copt-outs\u201d of the settlement. This is largely people exposed to Roundup who also developed non-Hodgkin lymphoma, a type of leukaemia. <\/p>\n
The Supreme Court decision potentially closes the door on one form of seemingly unlimited litigation for Bayer\u2019s Monsanto arm, but there is at least one final procedural hurdle to clear later this summer.<\/p>\n
Indeed, the next key date falls on 19 August, when the Circuit Court of the City of St Louis, Missouri, will decide whether to finally rubber-stamp the $7.25bn class action settlement already negotiated. Until that ruling, it is more accurate to say the litigation has been contained rather than fully fenced off.<\/p>\n
Bayer is contesting the class action lawyers\u2019 application for $675mn in fees \u2013 just under 10 per cent of the total settlement. <\/p>\n
If the ruling turns out to be clean \u2013 not subject to too many changes and not challenged on jurisdictional grounds \u2013 then this represents close to the final cap on litigation costs for Bayer.<\/p>\n
Other forms of litigation may still appear, but these are not thought to be anywhere near as damaging as the argument over Roundup\u2019s safety labelling, which turned on the gap between federal and state warning requirements.<\/p>\n
Whatever the outcome, Bayer\u2019s management appears to have already decided to move on from the argument.<\/p>\n
There will be a fuller update on strategic options at Bayer\u2019s next interim results on 4 August. The company has also scheduled a standalone crop science investor day for early September. As the company said alongside the June ruling, fighting this case has led to diminished \u201cinvestments in innovation\u201d. Now will be the time to show what it can do while unencumbered.<\/p>\n
\u00a0\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"It has been a good period for long-suffering investors in German conglomerate Bayer (DE:BAYN). The share price has…\n","protected":false},"author":2,"featured_media":52035,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21161],"tags":[21182,1202,42,26461,26460],"class_list":["post-52034","post","type-post","status-publish","format-standard","has-post-thumbnail","category-bayer","tag-bayer","tag-global","tag-news","tag-standard-article","tag-stocks-shares"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts\/52034","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/comments?post=52034"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts\/52034\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/media\/52035"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/media?parent=52034"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/categories?post=52034"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/tags?post=52034"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}