Bayer Agrees to New Review of Monsanto Purchase
February 27 2020 - 5:44AM
Dow Jones News
By Ruth Bender
BERLIN -- Bayer AG said it would strengthen external oversight
of its due diligence in deal making in its latest concession to
shareholders after its 2018 acquisition of Monsanto swamped it with
a tide of lawsuits and sent its stock crashing.
Bayer said Thursday that it would allow an independent expert to
review its rules for scrutinizing major deals and would publish the
results on its website in late March.
The concessions come a day after the German chemical and
pharmaceutical company said Chairman Werner Wenning was stepping
down earlier than planned and would be replaced by Norbert
Winkeljohann in April.
Bayer has also agreed to a new review of how it evaluated risks
in its $63 billion purchase of Monsanto, which shareholders have
criticized as overly risky after the acquisition plunged the
company into a major legal battle over Roundup weedkiller, which
thousands of Americans allege causes cancer.
The moves highlight Bayer's efforts to appease investors ahead
of its shareholder meeting in April. By then, many shareholders
expect Bayer to deliver progress on resolving the lawsuits. The
company has been exploring a comprehensive settlement.
There was no sign of such progress on Thursday, as Bayer
reported another rise in the number of plaintiffs. As of Feb. 6, it
faced a total of 48,600 plaintiffs, up from 42,700 reported three
months ago. Bayer argues that the weedkiller is safe and has
appealed verdicts in the three cases it has lost so far.
Bayer has been negotiating with plaintiff attorneys since last
summer to try to reach a deal to settle the claims. Bayer lost
three jury verdicts in the U.S. last year and has since come under
pressure from investors to find a way to put to rest the legal
fight that has been dragging down its share price and prompted
shareholders to withdraw confidence in Chief Executive Werner
Baumann at the group's annual meeting last year.
Shareholders have accused Mr. Baumann and Mr. Wenning of
underestimating the risks of the Monsanto purchase. Christian
Strenger, an individual shareholder in Bayer and a German expert on
corporate governance, filed a motion at last year's meeting for a
special audit of whether directors acted dutifully in handling the
Monsanto litigation risks.
The motion failed to obtain a majority but Bayer nevertheless
agreed to take some of the recommendations on board in an attempt
to assuage investors ahead of the shareholder meeting. Some
analysts expect the meeting to deliver another rebuke for Mr.
Baumann if Bayer can't show it is making progress on settling the
lawsuits.
Bayer said it hired an independent lawyer to review the legal
advice it commissioned before the Monsanto acquisition about the
legal risks of the deal. The lawyer and mass-torts expert James B.
Irwin concluded that the legal opinions, on which Bayer based its
decision to purchase Monsanto, appropriately analyzed the risks.
Bayer will also publish this report on its website.
Bayer last year had already hired external lawyers to examine
whether Bayer's management acted dutifully in their due diligence
of the deal. Bayer Thursday said those reports, which found no
breach of duty, would also be published in a more detailed
form.
Mr. Baumann reiterated Thursday that Bayer would agree to a
settlement only if it can bring a "reasonable conclusion" to the
entire legal battle, meaning it must also include a solution to
prevent lawsuits against Bayer in the future, a key sticking point
in settlement talks.
"We will pursue the three appeals through all judicial instances
if necessary," Mr. Baumann said in a statement.
One issue Bayer and plaintiff lawyers have been sparring over is
how many plaintiffs in total would be eligible for compensation in
a settlement, according to people familiar with the negotiations.
Some lawyers have estimated the total amount of plaintiffs at some
100,000, a figure Bayer dismissed as speculative and not reflecting
the actual number of served cases.
Separately, the Monsanto purchase helped Bayer post a rise in
profit and sales for its latest quarter, broadly meeting analyst
forecasts and helping the group reach its full year goals.
Net profit in the quarter swung to EUR1.41 billion ($1.54
billion) after a loss of nearly EUR4 billion in the same period
last year, helped by the integration of Monsanto and a recovery in
crops science. Sales in the quarter rose 3.8% to 10.26 billion in
the fourth quarter, driven by the group's blockbuster drugs, blood
thinner Xarelto and eye treatment Eylea and Latin American crops
science business.
Write to Ruth Bender at Ruth.Bender@wsj.com
(END) Dow Jones Newswires
February 27, 2020 05:29 ET (10:29 GMT)
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