Bayer's ‘Scary Number’ to Come Down at Appeal, Analysts Say

(Bloomberg) -- Bayer AG fell as much as 5% after being ordered to pay $2 billion in damages to a couple who said they got cancer as a result of using its Roundup weedkiller. Analysts expect the number will probably come down at appeal, though the company faces other similar claims, increasing its litigation risk. Meanwhile, the probability of Bayer becoming a target for activist investors or a takeover target is rising, according to a Baader Helvea analyst.


Bayer's ‘Scary Number’ to Come Down at Appeal, Analysts Say

Here’s what analysts are saying:

Baader Helvea, Markus Mayer (buy, PT EU123)

  • Third glyphosate verdict does not change view on investment story
  • Following Bayer’s immediate appeal, likelihood that scientific data will be more relevant, with emotion playing a lesser role in the second trial round
  • Does not see glyphosate cases bringing co. into chapter 11
  • Sees more than ~EU60b in litigation risk priced in the current valuation, he says by phone

Bernstein Gunther Zechmann

  • “Scary number” will clearly be reduced post trial: Expects the ultimate reward in third trial to be $110m in total if punitive damages follow previous Johnson case where ratio of punitive to compensatory damages was 1:1
  • Says with the Johnson case appeal just beginning, there is no evidence of appeal outcome

Citigroup, Peter Verdult (buy, PT EU100)

  • Sees “terrible” near-term sentiment on Bayer “stuck in the mud”
  • Verdult says his valuation range of EU92-EU100 implies more than EU30b of glyphosate legal-risk is priced in versus perceived settlement risk of EU1b-EU5b

Credit Suisse, (outperform, PT EU77)

  • Says the payment dwarfs the $289m and $80m damages from the last two court cases and is likely to be adjusted by the judge
  • $37b is implied settlement in net present value

Goldman Sachs, Keyur Parekh (buy, PT EU77)

  • Sees large headline damages in third jury verdict against Bayer
  • Sees risk in unfavorable outcome from ongoing glyphosate cases

Bloomberg Intelligence

  • Roundup risk continues to remain an overhang
  • Latest award may be cut, but overall settlement could rise to $6b to $10b based on 13,400 cases

©2019 Bloomberg L.P.