By Tassilo Hummel and Ludwig Burger
BERLIN (Reuters) - Bayer (DE:BAYGn) shares jumped on Thursday after it revealed plans aimed at resolving multi-billion dollar lawsuits linked to glyphosate, a move welcomed by activist shareholder Elliott, which has taken a sizeable stake in the chemicals company.
Shares in the German group, which have lost more than a fifth of their value since March, rose 8.7% to 60.86 euros, for their biggest daily gain in a decade. The company's market capitalization rose by 4.8 billion euro on the day.
Bayer said on Wednesday it had hired an external lawyer to advise its supervisory board and has set up a committee to help to resolve the glyphosate litigation issue.
Marks Manns, a fund manager at Union Investment, one of Bayer's largest German shareholders, said the share price was likely bolstered by anticipation of an earlier settlement.
"Investors want more certainty as quickly as possible. But it is for management to weigh up a quick settlement against how many billions you could save by holding out. I don't want a settlement at all costs," he said, adding that Bayer's negotiation position was for now highly unfavorable.
The company's shares have been under pressure following its $63 billion acquisition of Monsanto (NYSE:MON), which brought with it massive legal issues after more than 13,400 plaintiffs alleged the company's glyphosate weedkiller caused cancer - a claim Bayer contests.
Deka Investment, another major German shareholder said taking more legal expertise on board was "the right step", and was mainly a token of acknowledgement by the supervisory board of shareholder criticism.
Elliott Associates on Wednesday welcomed Bayer's steps, as it revealed for the first time its holding in Bayer shares worth 1.1 billion euros ($1.25 billion).
In a statement, Elliott also said Bayer's recent moves helped to resolve uncertainty linked to the glyphosate issue and lead to settlements with limited financial costs.
"Elliott believes that Bayer's discounted share price today does not reflect the significant underlying value of its constituent businesses, or the potential value realization opportunity that is in excess of 30 billion euros," it said.
Major shareholders have criticized Bayer for its handling of the glyphosate issue which resulted in a vote of disapproval of its top management at April's annual general meeting.
Janus Henderson, one of the company's top shareholders, welcomed the measures taken by Bayer as "sensible" and said they may lead to an earlier-than-expected settlement.
"It is unlikely to be a smooth ride from here" though as the company remains embroiled in lengthy litigation, said Dean Cheeseman, portfolio manager of its UK-based Multi-Asset Team.
Janus Henderson expects Bayer will lose its next glyphosate trial, which is scheduled for August in Missouri, the first one outside of California.
But the appeal processes starting later in the year "represents their best chance to change momentum in sentiment," he said.