Bayer Agrees to M&A Special Audit

Response to shareholder criticism of Monsanto deal

03.03.2020 -

Ahead of its upcoming annual general meeting (agm) on Apr. 28, Bayer has agreed to an independent special audit of its internal rules for conducting due diligence in preparation for mergers and acquisitions.

The concession announced by the German group’s CEO, Werner Baumann late last week is in response to a motion made by Christian Strenger, a Bayer shareholder and former CEO of Germany’s largest asset manager, DWS Investment at last year’s agm, calling for an investigation into the 2018 takeover of Monsanto. 

At the time, Strenger’s motion was rejected by shareholders with a support level of 25.7%m, but Bayer now has not only accepted the investigation but also Strenger’s proposal of a Frankfurt University professor, Hans-Joachim Böcking, to conduct the audit. A summary of Böcking’s conclusions will be published on the Bayer website before the end of March.

Bayer has also agreed for Ralph Wollburg of multinational law firmLinklaters and Mathias Habersack, a professor at the University of Munich, to issue more detailed statements about the legal opinions they prepared at the end of 2018 and in early 2019 concerning the managing board’s duties in relation to the Monsanto acquisition.

In the upcoming statements, also to be published on the website, the two legal experts are due to respectively explain how they concluded that management “had acted with due care in every respect and in compliance with its obligations under stock corporation law” when making the Monsanto acquisition.

Ahead of the $63 million US deal, Bayer said it had also hired an independent lawyer, mass-torts expert James B. Irwin, to review the legal advice it commissioned about the potential litigation risks concerning Roundup products. Irwin, it said, concluded that the legal opinions “thoroughly address and appropriately assessed” the risks. This report, too, will be published on the website.

Last year, both Baumann and retiring supervisory board chairman Werner Wenning faced hefty criticism from shareholders over their handling of the Monsanto acquisition. This year, they are bent on avoiding further criticism. In presenting the group’s 2019 annual results, CFO Wolfgang Nickl warned that Bayer may need to cover the Roundup settlements through further asset sales, “possibly on unfavorable terms” or by issuing additional debt or raising equity capital.

Nickl added that the $7.6 billion sale of its animal health business to Eli Lilly spinoff Elanco and the divestment of its 60% shareholding in site services company Currenta to funds managed by Australia-based Macquarie Infrastructure and Real Assets (MIRA) could free up needed cash.