BUY BAYER – Securing the future, DCF upside remains huge

*Plaintiffs agree a USD 2bn settlement -The USD 2bn is in line with what the company has previously communicated

*The main concern is in remaining plaintiffs that could emerge but this covers the class plan to manage and resolve future Roundup cases

*Preliminary approval of settlement set for Wednesday

*DBK points out that proposal similar to first attempt but addresses the concerns raised by the judge who declined the first attempt – Now includes establishing a science panel who will reach a final conclusion on weather glyphosate causes cancer – this could take up to 4 years

*Analysts’ raising questions about the ESG friendliness of the stock given its pesticide product – while if we look on BBG BAYN has 35% of women on board and 40% of female work force, a sustainability rating of 83.8 versus 71 for AZN LN for example or 46 for a company like SDF GY

*Worries have been that the total settled could go as high as USD 20bn but this implies only around USD 13bn assuming no other unsettled cases come forward – with BAYN’s market cap of USD 63bn an USD 8bn upside implies +12% upside for the stock on the back of this

*When BAYN announced the USD 11bn settlement news hit that the remaining lawsuits would be large and that put selling pressure on the stock but this settlement seems to sort the concerns from the previous settlement

*Our DCF comes in at EUR 70 short terms and EUR 90 long term which leaves a 75% upside long term