 Good day, film investors. One of the stocks you required me to analyze was Bayer. And here we go. So also David Einhorn, on which I made a video a few months ago about his investing strategy, is also a bull on Bayer and long Bayer. So it will be very nice analysis, very educational. And in the end, I will give you my opinion on the company. These are the topics, the overview of the company, the Monsanto acquisition, legal issues, of course Monsanto, David Einhorn's view is again flawed. And why would it be value? Just because the stock price declined. So let's see what's the value, what is Bayer about? The key investment highlights for the company when acquiring Monsanto are $1.2 billion in annual synergies. So that's a net EBTDA earnings before interest, taxes, depreciation and amortizations. And then again before special items targeted as of year 2022. So four years from now, of course, to most managers, interest, taxes, depreciation and amortization don't really count that much. It's a crazy, crazy acquisition to target those annual synergies. But okay, let's dig deeper. Bayer will evolve from a leader in the pharmaceuticals environment to a more balanced portfolio with Monsanto. A better picture looks like this from Einhorn's presentation, which you can download if you write Greenlight Capital Bayer Robinhood conference presentation. And here is the pro forma information. How would 2017 Bayer statement look with Monsanto included? The key is okay, net sales will go up to 45 billion euros. But for me, the big key there is Goodwill, 46 billion intangible assets, excluding Goodwill, also 46 billion and the debt, buyers that goes from a relatively, okay, 14 billion on 45 billion of sales to 43 billion on 45 billion of sales. So they are buying a company, a risky company like Monsanto and they are increasing the uncertainty with that acquisition, but they are also increasing the certainties in the form of debt. Because if there is something certain when it comes to investing in businesses and stock markets, that is debt and buyer has now 43 billion of certainties, not including pension liabilities. I did a recent video about Seth Klarman and two of his messages were the following. Beware leverage in all its forms, borrowers, individual, corporate or government should always match fund their liabilities against the duration of their assets. Borrowers must always remember that capital markets can be extremely fickle and that it is never safe to assume a maturing loan can be rolled over. So markets can be extremely fickle. So 44 billion from 14 billion to 44 billion makes buyer a riskier stock than it was and therefore it deserves a lower valuation. Now who makes the money in such a deal? It's easy to think shareholders in the long term 2022 synergies, but no, Wall Street banks make immediate money in such situations. So they could make close to 700 million dollars from the buyer Monsanto deal. So Morgan Stanley, Duceira partners, Credit Swiss, Bank of America, Merrill Lynch and Rothschild are all advising on the deal and tend to make as much as 190 million combined if the deal is completed. Seller side, buyer side and then again those will also be giving money to buyer for the bridge loans in a total which could lead to profits of increased 700 million in total for such companies. So you will never find an advisor, an investment banker that will advise against an acquisition. If you find one, you simply go to somebody else and somebody else will get that business. And that's why we have such extremely leveraged acquisitions at extremely high EBITDA levels. I think the Monsanto acquisition started at 18 EBITDA and then after the divestments went to 15 EBITDA, which is still crazy. So what did buyer pay $66 billion for what? Free cash flows of $2 billion in 2017, $1.6, $2.5 in 2015. So what is that? Price to free cash flow of $30 and also a PE ratio of $30. So they paid a price earnings ratio of $30 to get to Monsanto hoping that there will be synergies and hoping that there will be growth. But as the deal closed, this is the news. Monsanto was ordered to pay $289 million in a landmark lawsuit over weather exposure to two of its weed killers caused cancer. As we know Monsanto, there could be much more pain coming its way after this. Further, also a petition urging multinational buyer to withdraw an appeal against the top European court decision on banning Neonicotinoids has gathered more than 150,000 signatures in just two days in Europe. So the karma surrounding this company Monsanto and buyer isn't really that positive. However, buyer according to Einhorn is even a bigger bargain now with lower stock prices. So when it compares to consumer peers, crop peers, pharmaceutical peers, buyer looks like a bargain. But does this mean buyer is a bargain or all others are expensive? So it depends what kind of investor you are. A relative focused on what the market thinks or a business investor focused on your business returns, which are price earnings ratio of 10%, 10% dividend, 3% or 4% what it is with buyer and what you can expect in the long term. So if you're happy with 4%, buyer will probably deliver, will probably grow the dividend in the future. But don't expect more than 3%, 4% coming from that. And with increasing interest rates, those dividends are less and less attractive. Further from Einhorn's Robinhood conference, he expected total revenue when the companies are combined to be at 52, 53 billion euros in 2018 with EBITDA 16 billion growing to 60 billion in revenue EBITDA 20 billion by 2021. But we have seen that net sales will be 45 billion which really lowers the EBITDA also, let's say it goes to 10 net income to seven. And then the price earnings ratio is not 10, but it's already 14, 14, 15. And then alongside with the growth, let's say that it stays like that over to 2021, perhaps in 2021, it will be 10. If things stay stable and there are no impairments, there are no legal issues, the market stays stable, no recession, et cetera, et cetera. For a company that has a lot of debt, that has a lot of intangibles, I think a price earnings ratio between 10 and 15 depending on what they do is pretty fair. The risks are also high from a legal perspective. So let's say I think buyer is fairly priced. I will not invest in it because I don't like Monsanto, I don't like buyer, I don't like drugs, so I simply don't like it. And that's why I'm not really a fan of it. I prefer to find different kind of businesses. So let's still look at the stock price. Many think it is a bargain because it went from above $130 to what 90 now also in euros close to 150 euros in 2015. Now it's at 77, but just because something went down in price does not mean it's a bargain. Let's look at the long-term picture. We have seen buyer hit severely in the 1990s from above 50 to what 10 euros again from above 50 to 40 in 2008, 2009. And then huge spikes from 2002 to 2006, from 2011 to 2015, and then again huge drops. So buyer is not really a stable company, a stable stock, as it depends on the success of a drug, on the success of a crop, of a fertilizer now, et cetera, et cetera. Further also earnings are very volatile. The last two or three years have been very good, but if you look at long-term 10-year average earnings, those are not that spectacular and go down to an average of what, 4, 3, 4, which means that the cap ratio is above, still above 24 buyer. Now the dividends have been there, have been growing slowly over time, and probably they will do whatever they can to keep those dividends there, but mind the debt and mind higher interest rates. Further, something very interesting. In 2015, buyer started with the divestment of the Covestro Group, which is a company that had EBITDA of 2 billion in the first half of 2018. So they spun out Covestro at an evaluation between 10 billion at the beginning and 20 billion when they sold the last part of it. So let's say they got 15 billion for a company that just did 2 billion in EBITDA in half a year, and they used then 50 billion for a company that does the same for the whole year. Beautiful management by buyer. So free cash flow, 2 billion euros for Covestro, divested for 15 billion, and 2 billion dollars for Monsanto, acquired for 66 billion. That's really an example of amazing management by buyer. So to conclude, a lot of question marks here, and that's why I said it's fairly priced. The pharma business has a limit, time limit, those patents expire sooner or later. Pricing issues, constantly competition from other competitors. Crops have issues, legal issues we have seen with the 293 million ruling, so not really good karma there. Then the balance sheet has really been extremely leveraged lately, and that's a huge risk. And therefore I think it's fairly priced at the dividend yield of 3-4% in this current market. If the current market changes, this could go a lot lower. Just to conclude, when a company like buyer divests, acquires, who makes money, of course, always, always Wall Street makes money because Wall Street lives of commission, not on increasing shareholder returns. With that, thank you for watching, looking forward to your comments, and I'll see you in the next video.