By Jessica Sier
Bayer AG shares rose on Thursday, after the company settled tens of thousands of lawsuits alleging the company's Roundup herbicide causes cancer.
The German company said it would pay up to $10.9 billion to settle the cases, including $400 million to settle litigations regarding another herbicide Dicamba and $820 million for waterway contamination.
Shares were trading 2.8% higher to EUR71.97 at 0705 GMT.
Bayer's legal battles have weighed on the share price for nearly two years, following Bayer's purchase of U.S. agricultural business Monsanto Co. for $63 billion in 2018. Bayer inherited these legal battles from the acquisition.
Since then, the company suffered three jury-trial losses that caused the stock to fall sharply and prompted angry shareholders to revolt against Bayer's management. Bayer didn't admit any wrongdoing as part of the settlements, with the company maintaining that glyphosate, the active ingredient in Roundup, is safe and doesn't cause cancer.
Analysts were surprised Bayer settled the Dicamba and waterway litigations as well.
"The settlement in dicamba was largely unexpected but welcomed," Gunther Zechmann, an analyst at Bernstein, said.
Deutsche Bank AG analysts agree that settling the other two Monsanto litigations is positive.
"While this undoubtedly constitutes a large amount of money, we believe that it provides a reasonable degree of finality to the litigation issue, and that it removes a significant overhang on the investment case," Deutsche Bank analysts said.
Now that investors know how much Bayer will have to pay, they can refocus on the company's growth plans, with Citi pointing to a need for visibility on Bayer's pharmaceutical plans.
"While the recovery at Consumer is gathering pace, pipeline perception for Pharma remains muted, and the outlook for crop commodity prices [is] poor given supply/demand dynamics," Citi analysts said.
"We hope visibility around innovation efforts at Crop/Pharma become clearer."
Write to Jessica Sier at email@example.com