Berenberg remains cautious on Bayer amid ongoing US litigation
Bayer shares saw a modest uptick in Frankfurt trading, rising 0.47% to EUR35.96. Berenberg has revisited the company's US legal challenges, maintaining its hold rating while marginally raising its target price from EUR40 to EUR40.50.
Analysts had hoped for greater clarity by early June regarding whether plaintiffs would accept Bayer's $7.25bn settlement offer to resolve outstanding glyphosate litigation. In their view, this agreement represents Bayer's best insurance policy against a potential defeat in the Durnell case currently before the US Supreme Court.
They estimate that the verdict, expected by the end of July, carries a 60/40 probability in favor of the German giant. "This remains uncomfortably close to a coin toss," analysts noted.
Berenberg identified two potential sources of delay: first, the settlement administrator must verify the validity of the opt-outs, and second, the conditional transfer in late May of the Missouri class action to the multidistrict litigation in California federal court.
If this second step is confirmed, it would grant oversight to Judge Vince Chhabria. The judge previously characterized the settlement as a "dishonest deal." Analysts believe he was partially responsible for the collapse of negotiations in 2021. The German bank indicated that Bayer might still avoid the transfer of the glyphosate class action to California, though this is not yet guaranteed. A rejection of the settlement would not be irreparable, but it could leave the agrochemical and pharmaceutical specialist even more dependent on a favorable outcome at the Supreme Court.
In the event of a victory, analysts believe the stock could "easily climb toward the mid-to-high €40 range." Conversely, the complexities surrounding the settlement suggest that a floor of approximately €30 per share could be tested if the company loses.
Bayer AG is one of the world's leaders in designing, producing, and marketing pharmaceutical products and agrochemicals. Net sales are distributed by product family as follows:
- agrochemicals (47.5%): herbicides, fungicides, insecticides, etc.;
- pharmaceutical products (39.1%): intended for the prevention and treatment of cardiovascular and respiratory diseases, diabetes, nervous system disorders, etc.;
- OTC products and nutritional supplements (12.7%);
- other (0.7%).
Net sales are distributed geographically as follows: Germany (5.7%), Switzerland (1%), Europe-Middle East-Africa (22.9%), United States (33.1%), North America (3.6%), China (7.6%), Asia-Pacific (8.9%), Brazil (9.6%), and Latin America (7.6%).
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