Bayer has to pay 81 million dollars in damages to a man claiming that roundup, the herbicide that caused his cancer, claimed a jury on Wednesday. In a similar ruling last year, $ 289 million was lowered to $ 78 million on appeal. Since this first ruling, Bayer shares have lost 40% of their value – and there are still around 11,300 cases available.
All this raises the question: Was it unwise for Bayer to buy Roundup maker Monsanto? 19659002] Some, including the activist Bayer shareholder Christian Strenger, say that this was indeed the case. Strenger submitted a vote of no confidence in the run-up to the Annual General Meeting of the German giant next month against the Bayer Board of Management. It contained a whole series of complaints about the "almost complete failure of the main goals that Baumann [Bayer CEO Werner] Baumann had submitted in May 201
But before we look at Strengers argument, let's take another look at the background of this $ 66 billion hops.
Why Bayer Buys Monsanto
Bayer purchased Monsanto as part of its reinvention as part of the New Intervention life science company focused on health and agriculture. By the time the deal was proposed in 2016, the agronomic landscape has changed dramatically – Dow and DuPont are merging, as are ChemChina and Syngenta. Bayer wanted to become a larger seed and genetically engineered seeds company, and Monsanto provided just that.
Monsanto was also at the forefront of emerging digital agriculture, Informa editor-in-chief of Agro's Sanjiv Rana crop protection analysis equipment said. "The acquisition gave Bayer an edge in this area," he said.
However, there were problems from the start.
First, the deal raised antitrust concerns in the US – it was only implemented after company approval, according to the Justice Department's claims that Bayer's Liberty herbicide business with Roundup rivalry, as well as the cotton, rapeseed, soybean and vegetable seed business, sells various research and development projects as well as the Bayer digital agriculture business. The chemical company BASF was the lucky buyer and paid $ 9 billion.
And then there was the glyphosate question. The International Agency for Research on Cancer (IARC), a World Health Organization (WHO) agency, published a report in early 2015 stating that the pesticide that is Roundup's active ingredient is "likely to cause cancer for humans". A second report by WHO and the United Nations made it clear that glyphosate "is unlikely to pose a carcinogenic hazard to humans when exposed to food." This was consistent with other findings of the matter. However, eating roundup residues is one thing and spraying the material over many years – as with both successful claimants – is another.
The IARC report, which found that glyphosate is likely to be carcinogenic, was based in part on studies with farmers of the substance. Why did not the regulators punish? "Many regulators rely primarily on industry data from toxicological studies that are not publicly available," notes the IARC in a Q & A on their study. "In contrast, the IARC systematically collects and evaluates all relevant, publicly available data for independent scientific review." Essentially, the IARC, not itself a regulatory authority, examined data sets other than the data considered by regulators and examined industry studies
Strenger, a prominent German governance expert, said Fortune . The most important question in the course of cancer cases is whether "[Monsanto’s marketing operation did] too few warning signs."
"Mr. Baumann of Bayer always refers to 800 opinions that glyphosate is a safe product," said Strenger Problem is how it was applied, and it was duly sold with sufficient warning signs. "
Strenger claims in his motion of censure that Bayer still outlays the legal risks of the 3,600 underestimated, partly because Monsanto was banned by the US The Department of Justice announced to Bayer all the details of the cases.
"[Bayer] should have insisted," he said. "These were not military secrets. Bayer should have told Monsanto: Either you will get the DOJ to release the disclosure or we will not continue the transaction. "Strenger suggests, however, that after two years Bayer had to deal with issues such as the antitrust consequences of the deal with Bayer. The board may have been tempted to be" lenient with a proper legal analysis ".
Bayer rejects this idea. One spokesman insists that the Bayer board of directors prior to the Monsanto acquisition "conducted this risk assessment on the basis of an information and update process that was sufficient for such an order in every respect."
"Of course The Board also reviewed the risks associated with Monsanto's glyphosate business, "said the spokesman. "This risk assessment has clearly shown that Monsanto products containing glyphosate are safe when used as intended. Based on the views of regulators worldwide and scientists, the Board of Directors assessed the legal risks associated with the use of glyphosate as low. "
As far as Strenger goes, there were thousands of lawsuits pending before the transaction closed in mid-2018 At the time of the merger agreement in September 2016, only 120 lawsuits were pending.
Strenger also claims Bayer underestimated compulsory sales Sales slashed planned synergies by 20%. "Most divestments were widely expected," said Bayer spokesman. "Some additional divestments were not expected."
"Difficult to predict"
According to Agrows Rana, "there is really no big case against Monsanto" as the regulators did not consider Roundup to be risky. Therefore, the company was not required to apply Roundup's warnings to its packaging Roundup, "but the jury are affected by emotions, and that is the case in both cases."
"Although a thorough due diligence was undergone Bayer, the emotional impact on the outcome of these cases was hard to predict," he said , "The upcoming Annual General Meeting is likely to be a tumultuous one, but I doubt that a vote of no confidence would come through."
Up to this point, the spokesman for Bayer stated: "In its last meeting, the Supervisory Board expressly confirmed this again the Board and its strategy, including the acquisition of Monsanto, unanimously.
Regarding the potential liabilities, Rana pointed out that the Judge judged the jury in the first successful roundup lawsuit involving Dewayne Johnson. The damage verdict reduced the claims to less than one-third.
"When judges come into the picture, decisions should be less emotional," Rana said. "Bayer may be able to stand it, even if it seems at present seemingly insurmountable adversity."
The assessment of the judgment of the Bayer Board ultimately depends on how bad the litigation harm the company. Strenger noted the losses since the Monsanto acquisition in June last year. The market is expected to lose tens of billions of dollars. But with so many charges coming up, it's hard to say what the final balance sheet will look like.
"From a legal point of view, it must be remembered that the responsibility of management is based on the facts that were available at the time of the decision, and not on the information available afterwards," said Andreas Cahn, director of the Institute of Law and Finance Goethe University in Frankfurt.
From a business point of view, however, it is all about the result.