Will the Bayer Roundup settlement end its Monsanto nightmare? | Business | Economic and financial news from a German perspective | DW
Bayer has agreed to raise nearly $ 11 billion to settle thousands of U.S. lawsuits alleging that its widely used herbicide Roundup causes cancer, in part solving a major problem affecting German chemistry and industry Plunged pharmaceutical company into one of the worst crises in its history.
The company said on Wednesday the settlement, which included no admission of liability or misconduct, would settle approximately 75% of the 125,000 total Roundup lawsuits. The settled cases make up about 95% of the cases currently brought to trial. As part of the deal, Bayer is paying up to $ 9.6 billion to resolve all litigation, including the 30,000 that have not yet been resolved.
The grand total includes $ 1.25 billion to settle future claims that are governed by a collective agreement that is pending judicial approval.
Part of the amount would be used to fund a scientific panel to determine if glyphosate – the chemical compound in Roundup – is causing cancer, to ensure Roundup’s legal issues are resolved once and for all. If the panel determines that glyphosate is not carcinogenic, the plaintiffs, who are part of the collective agreement, will be prohibited from filing future lawsuits against the company.
The comparison represents a seldom positive development in recent years for the competitive 157-year-old company, whose shares have been hurt since the unfortunate acquisition of US seed company Monsanto valued at $ 63 billion and its legal troubles in 2018 . After hitting its low in March, Bayer stock is trading almost a third lower than it was in 2016, when it was first announced that the company was in talks to buy Monsanto.
The transaction is intended to calm the nerves of investors who want to see Bayer’s legal issues related to Monsanto so that the company can pursue its strategic priorities. Their frustration with Bayer’s handling of the Monsanto takeover and the ensuing process tsunami led them to vote of no confidence in CEO Werner Baumann at last year’s shareholders’ meeting, making him the first German CEO to face such shame .
“Although this is undoubtedly a large sum of money, we believe that it gives the litigation a reasonable degree of finality and removes a significant backlog in the investment case,” Deutsche Bank analysts wrote in a statement to their clients.
got off lightly?
Bayer expects to make the payments over the next two years. The company plans to fund the transaction with cash, future savings, proceeds from the sale of the animal health division, and by raising additional debt.
The company claims Roundup is safe and cites findings from dozens of regulators, including the US Environmental Protection Agency, to support its claim. But you have still promised to pay billions in order to “end a long period of uncertainty,” said Baumann.
While the comparative amount is in line with analysts’ estimates, some say Bayer got away with it easily. You cite the substantial financial and reputational costs of contesting a large number of cases, which Baumann alluded to in his statement.
“Compared to the significant financial risks of ongoing multi-year litigation and the associated impact on our reputation and business, this is financially reasonable,” he said.
By comparison, the amount Bayer has to pay each of the 125,000 plaintiffs is less than half of what Merck paid in 2007 to settle claims related to its pain reliever, Vioxx.
Bayer said it would continue to appeal the first three lawsuits it lost in California last year. A judgment on the first case could be made in the summer.
The settlement comes just days after a U.S. federal judge rejected the California government’s offer to issue cancer warnings for glyphosate-based herbicides.
“If the three cases that are still rumbling through the courts end in Bayer’s favor, he [Baumann] is faced with charges of wasting shareholders’ money, “wrote Ed Cropley, columnist for Reuters Breakingviews. Ailing litigants take over a large company.”