Baumann Calls US Legal System Unjust

01.03.2023 - At his last – virtual – annual results press conference before handing over the CEO’s job to Bill Anderson in May, in addition to reviewing figures for 2022 and trying to assess the still clouded look for 2023, outgoing Bayer chief Werner Baumann took the opportunity to criticize the US legal system.

Litigation over the carcinogenic potential of the glyphosate-based nonselective herbicide Roundup Bayer inherited with the takeover of former agribusiness giant Monsanto – a project driven forward by Baumann – has ended up sending him into early retirement as lawsuits piled up.

Companies operating in the US are at the mercy of an unjust system, and it can hit any of them, Baumann suggested. Companies are “preyed on” by litigation-happy lawyers and are additionally at risk from lay juries obliged to rule on complex issues, he added. This, he said, is “particularly problematic” as the appeals courts are not reassessing the facts.

Up to now, Bayer has paid out $9.5 billion in Roundup settlements and has budgeted a further $6.4 billion as it attempts to bring the protracted litigation to a close. 

While Baumann has defended his record as CEO, commentators reflecting on the situation at the once top-line blue chip market player, where a new broom will begin sweeping soon, are taking a more sanguine view.

Nearly five years since the Monsanto deal, they point out, Bayer’s share is in the doldrums and is trading below its value when news of the impending deal first surfaced. Although the stock is currently gaining some momentum, the paper has given up about 40% of its value since the Monsanto deal closed in June 2018.

Several activist investors are now hounding present and future management with calls for a breakup of the company into two, or even three units: Healthcare, CropScience and consumer drugs.

Weighing in on future perspectives after the sitting CEO forecast that earnings will decline in 2023  after adding more than 20% in 2022 –despite the ongoing litigation – Markus Manns, a fund manager at Union Investment, which reportedly owns 1.3% of Bayer, wrote that Baumann is leaving behind a “construction site.”

Would-be (re)builders are watching and waiting, and speculating is building about what could be in store for the venerable German group under the next CEO. Last week, Bayer appeared to be trying to gain control of some of the dialog by inviting one of the activist investors, Jeff Ubben, to sit on its sustainability council.

Ubben, founder of two hedge funds including his current vehicle, Inclusive Capital, has said that Bayer group could become a “sustainability hero” by creating products to address food security and climate change problems.

Some said they doubted that Ubben would be satisfied with a sole responsibility that does not include any decision-making power. At last count, Inclusive Capital had shelled out €500 million for a 0.8% stake in Bayer.

In previous campaigns, the US investor has reportedly sought and won seats on company boards. Ubben himself has been quoted as saying he doesn’t think that seats on the sustainability and supervisory boards would be mutually exclusive.

The sustainability council was established in 2020 and according to Bayer has access to relevant documents and expertise within the company.

While advocating for resolution of the remaining Roundup lawsuits, Ubben is also believed to be studying the prospects for splitting Bayer into separate companies.

Author: Dede Williams, Freelance Journalist