Bayer Faces 5,000 new Roundup Lawsuits
In presenting first half-year financial results on Jul. 30, the German group acknowledged it is now facing 18,400 claims, up from 13,400 just three months ago. Even with California judges having reduced through-the-roof damage payments awarded by juries in the three trials to date – all of which Bayer has lost – court challenges evidently still look attractive.
Bayer’s share price, by contrast, is looking less and less attractive to investors, leading some analysts to again speculate that it could be headed toward out-of-court settlements as potential costs mount. The share fell 3-4% in Frankfurt on Jul. 30 on news of the higher number of suits and a weaker business performance forecast.
CEO acknowledges Bayer has entered mediation
While in its earnings statement the group said it continues to believe it “has meritorious defenses and intends to defend itself vigorously in all of these lawsuits,” in a conference call, CEO Werner Baumann admitted that Bayer would consider a “financially reasonable” settlement as the Roundup litigation drags on. However, he was not specific about what management would consider reasonable.
For the first time, Baumann acknowledged that Bayer is “constructively engaging” with a court-appointed mediator, Ken Feinberg.
Some analysts pointed to the lack of clarity about the potential settlement risk and Bayer’s weaker quarterly performance as worrying signs. Mustaq Rahaman, a credit analyst at Bloomberg Intelligence, commented: “This set of results will do little to stem calls for more dramatic action including a split.”
Activist shareholder Elliott Management Corp., which last month unveiled a $1.3 billion stake and is seen as favoring a split of pharma and agriculture, suggested earlier that Bayer could unlock €30 billion in shareholder value with a settlement
Carl Tobias, a professor at the US University of Richmond’s law school, who teaches mass-tort litigation, told Bloomberg that Bayer’s definition of what a reasonable settlement amount for all the Roundup cases could look like isn’t likely to match up with estimates from lawyers for users of the herbicide.
“They aren’t going to like the numbers the plaintiffs are going to demand,” he said.
In its six-month statement, Bayer said group sales advanced 21% to €11.5bn, reflecting the Monsanto acquisition. Adjusted for portfolio and currency effects, the rise was just 1%. Adjusted H1 EBITDA rose 24.7% to €2.9 billion. The fact that the first quarter’s EBITDA was up 44.6% year-on-year points to the same negative US agricultural market factors BASF alluded to last week in its Q2 2019 statement.
Heavy flooding across North America delayed the planting season for farmers, while trade tensions with China have hurt farmers’ ability to export soybeans, thus curbing demand for herbicides, both Bayer and BASF said. At the same time, dry weather in Europe also has hurt agrochemicals sales.