The Germany-based economic and financial daily Handelsblatt today has published a long analysis of the Bayer group, as it has consolidated the $63bn acquisition of Bayer. The financial community is skeptical about the added value Monsanto has provided to the Leverkusen-based group, suffice it to remind that Monsanto was worth €95 per share (Frankfurt) as Bayer’s management started negotiating its value two years ago, while it has now declined to as little as €73, with a loss over €18bn in capitalization (-23%). Despite this, the same Crop Science division is reporting the best financial performance, whereas the pharmaceutical and Consumer Health divisions appear to be struggling. The future blockbusters Xarelto (anticoagulant) and Eylea reported sales increases of respectively 12% and 20%, fairly below analysts’ expectations. Sales of the cancer treatment Stivarga only increased by 5%, due to competition by the new drugs developed by US drugmakers. Although the growth didn’t meet expectations and sector standards, Bayer’s pharmaceutical division has a 27% EBITDA, perfectly in line with competitors. However, what raises most concern among investors is the glyphosate scandal, with potential to bring Bayer thousands of lawsuits and expenses nearing €7bn, UBS estimates. Despite this, Bayer’s Crop Science division reported an EBITDA of 28%, far exceeding the average level in the sector–Syngenta’s EBITDA was 23.5%.
Debt is another critical issue to Bayer: indeed, the Monsanto deal has created debt now totaling €44.7bn, expected to decrease to €37bn before the end of the year, following the divestiture of some assets to BASF for €7.6bn. However, Bayer’s management is confident that such debt will be soon offset, because the group is expected to generate €5bn to €6bn cash flow over the next few years.