BREAKINGVIEWS-Trump’s Bayer intervention sows seeds of breakup

By Aimee Donnellan

DUBLIN, Dec 2 (Reuters Breakingviews) - Donald Trump’s intervention into the legal mess of a European company is somewhat off brand. On Monday, the U.S. president urged the country’s Supreme Court to review an appeal from Germany’s Bayer BAYGn.DE which is seeking to quash thousands of lawsuits from plaintiffs who claim the company’s Roundup weedkiller causes cancer. Trump’s motivation may be more about boosting U.S. agriculture, but if his action means the top court sides with Bayer, then Tuesday’s 10% share bump offers just a glimpse of a brighter future. It may also encourage CEO Bill Anderson to revive a breakup plan.

The Roundup saga has plagued Bayer since its disastrous acquisition of Monsanto in 2018. The company has paid about $10 billion to settle lawsuits that were pending as of 2020 and it is still facing more than 67,000 such claims in U.S. state and federal courts. If the U.S. Supreme Court were to follow Trump's suggestion and rule on the cases, a verdict could be delivered by the summer of 2026, a source close to the situation told Breakingviews.

Bayer has plenty to gain from a ruling going its way. Over the past two years, the company’s share price has halved as investors fretted about a seemingly never-ending litigation bill. The cases also make it harder to unpick the German company’s clunky conglomerate structure, which houses an over-the-counter medication business, a pharmaceutical unit and a weedkiller and seeds division under one roof, leading to a big conglomerate discount. Activists like Jeff Ubben’s Inclusive Capital Partners have previously pushed for a breakup but the legal overhang would make it difficult to sell or list the seeds business.

If Trump is successful in his lobbying efforts the seeds unit could get a welcome valuation boost, and Anderson may be more likely to explore ways of releasing the value in Bayer's different parts. To see the potential upside, first assume the German group's pharmaceutical unit is valued at 7.4 times its expected EBITDA for 2026 and its consumer arm on 13.7 times, both in line with peers GSK GSK.L and Haleon HLN.L respectively. In this scenario the combined value of those two businesses would be 49 billion euros. Bayer's 68 billion euro enterprise value implies the crop science division is worth just a little over 19 billion euros, or less than 5 times its expected EBITDA for 2026.

That looks low, given U.S. rival Corteva CTVA.N trades on 11 times its expected 2026 EBITDA. If Bayer's crop unit were valued similarly, it would be worth 44 billion euros, and the sum of Bayer's parts would total 93 billion euros, over 30% above its current enterprise value. There is a chance that the Supreme Court chooses to stay out of the fray and claims against the German seeds-to-drug maker will continue. But if it obeys Trump and sides with Bayer, then Anderson may finally be able to call time on the group's unwieldy structure.

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CONTEXT NEWS

President Donald Trump's administration urged the U.S. Supreme Court on December 1 to take up Bayer’s bid to curtail thousands of lawsuits claiming its Roundup weedkiller causes cancer.

In a brief filed at the court, U.S. Solicitor General D. John Sauer bolstered Bayer’s effort to limit the lawsuits and potentially avert billions of dollars in damages, saying the company was correct that the federal law governing pesticides pre-empts lawsuits that make claims over the products under state law.

Bayer has asked the justices to hear its appeal of a lower court's decision to uphold a $1.25 million verdict awarded by a St. Louis jury in a Missouri state court case in which a plaintiff named John Durnell sued after being diagnosed with non-Hodgkin's lymphoma he attributed to his exposure to Roundup. Bayer is facing more than 67,000 such lawsuits in U.S. state and federal courts.

The German pharmaceutical and biotechnology company, which acquired Roundup as part of its $63 billion purchase of Monsanto in 2018, has said that decades of studies have shown Roundup and its active ingredient, glyphosate, are safe for human use.

Shares in Bayer were up 10.98% by 0932 GMT on December 2.