How many billions is Bayer AG setting aside?
By Mark A. York (August 9, 2019)
(MASS TORT NEXUS MEDIA) The Bayer AG executive suite seems to be leaning toward settling the Monsanto (Bayer) Roundup MDL 2741 litigation, along with the thousands of cases in state courts around the country. A previous statement on settlement was, this is “financially reasonable” to review settlement of all litigation over the weedkiller Roundup, and is under review.
Bayer engaged additional senior defense counsel from Skadden, Arps and there is word of casual settlement discussions among people directly involved in the litigation. MDL Judge Chhabria has set a hard remand docket, and also appointed mediator Ken Feinberg to help move settlement along. How this all comes together in settlement discussions remains to be seen.
Is this where all plaintiff counsel remain together in forcing Bayer into high-value settlement, or where individual firms will attempt to carve out settlements based on their firm inventory?
The number of lawsuits from people in the U.S. who say the herbicide caused them to develop cancer rose by about 5,000 to 18,400. That is an enormous increase in lawsuits and there’s now an effort to make sure Bayer pays a premium settlement as the docket continues to grow.
BAYER IS SELLING ASSETS
Bayer is selling units to sharpen its focus after the $63 billion purchase of Monsanto, which saddled it with thousands of lawsuits claiming that the Roundup weedkiller it acquired in that deal causes cancer. The German giant agreed to unload its majority stake in a chemicals venture Wednesday in a deal valued at $3.9 billion, and two Roundup trials have been delayed as pressure builds to settle. Cash received from Bayer asset sales, may be going directly into the Roundup settlement fund.
Quarterly sales and earnings missed estimates and the German company questioned its ability to meet its full-year forecast. The shares fell 3.4 percent in Frankfurt.
Baumann has staked his credibility on last year’s $63 billion takeover of Monsanto Co., claiming the company is better off balancing its portfolio between agriculture and health care. But the surge in U.S. lawsuits alleging that Roundup — which Bayer inherited from Monsanto — causes cancer suggest settling the claims will become more much more expensive than previously thought.
“The jump in lawsuits is worrying,” said Mustaq Rahaman, a credit analyst at Bloomberg Intelligence. “This set of results will do little to stem calls for more dramatic action including a split.”
The chemicals and pharmaceutical giant said it would create a special committee of eight supervisory board members to monitor Roundup lawsuits and consult with management on legal strategies.
Bayer named U.S. lawyer John H. Beisner, an expert on mass tort and product litigation at Skadden, Arps, Slate, Meagher & Flom LLP, to advise the board on all Roundup legal matters, including trial tactics and mediation.
Bayer cited Mr. Beisner’s experience in negotiating high-profile settlements and said it looked forward to “constructively engaging in the mediation process.” A U.S. judge has provisionally appointed Kenneth Feinberg to serve as mediator in the consolidation of hundreds of Roundup cases filed in federal court. Mr. Feinberg has served as mediator in high-profile cases, including the Deepwater Horizon oil spill in the Gulf of Mexico in 2010.
U.S. hedge fund Elliott Management Corp., which owns some €1.1 billion ($1.25 billion) worth of Bayer shares, or about 2% of the company, backed Bayer’s latest steps. It said the new committee would provide “a new level of oversight and a fresh perspective to a litigation strategy in need of radical overhaul and help guide the company towards a rational, fair and swift settlement.”
U.S. Judge Vince Chhabria is handling the Roundup MDL 2471 lawsuits and has been moving the docket at a very fast pace, and denied Bayer’s Motion to Overturn the recent jury verdict, for case information see, ROUNDUP-MONSANTO-(GLYPHOSATE)-MDL-2741-(USDC-ND-California).
Baumann said on a conference call that he is open to a settlement as long as it resolves all Roundup litigation. He repeated that the herbicide is safe, that the cases have no merit and that the company is “constructively engaging” with court-appointed mediator Ken Feinberg.
After the call, Bayer declined to say how much a “financially reasonable” sum would be or whether Baumann was referring only to the current load of cancer cases or the possibility of future Roundup suits tied to other ailments.
Bayer’s definition of what a reasonable settlement amount would be for all the Roundup cases isn’t likely to match up with estimates from lawyers for users of the weed-killer, said Carl Tobias, a professor at the University of Richmond’s law school who teaches about mass-tort litigation. “They aren’t going to like the numbers the plaintiffs are going to demand,” Tobias said. “Maybe Ken Feinberg can work something out.”
Bayer’s legal woes at the agricultural unit are being compounded by bad weather. In North America, heavy flooding has delayed planting season for farmers, while trade tensions with China hurt U.S. farmers’ ability to export soybeans, curbing demand for Bayer’s products. Just as Bayer reported earnings, U.S. President Donald Trump lashed out at China for what he said is an unwillingness to buy American agricultural products.
Bayer’s pesticide sales struggled in Europe too, due to unusually dry weather. Revenue at the crop science unit fell 3.1% after adjusting for currency and portfolio effects associated with the Monsanto takeover, Bayer said.
The Leverkusen, Germany-based company reiterated its annual financial forecast and its plan to defend itself in the Roundup litigation, while saying it will “constructively engage” in the mediation process ordered by a California judge. The company has aimed for about 46 billion euros ($51 billion) in revenue and profit of about 6.80 euros a share for this year.
Bayer’s other challenges include selling off its animal health division, rekindling growth at its ailing consumer-health division and coming up with promising new medicines for its pharma unit, where top-selling treatments Xarelto and Eylea both face losing patent protection next decade.
Bayer’s shares have plunged about 40% in the past 12 months amid concern over legal claims that Roundup and its main ingredient glyphosate can cause cancer. Activist shareholder Elliott Management Corp., which unveiled a $1.3 billion stake in last month, has said the company could unlock 30 billion euros in shareholder value with a settlement.
Still, some analysts say the company is right to spread its focus between different businesses to help manage the ebbs and flows of each unit.
“If Bayer just had the pharma business, the stock would be super risky, because the pharma business has some medium to long-term concerns,” said Dennis Berzhanin of Pareto Securities. “Yes, they’re having short-term problems right now with crop science, but it reduces the risk of the company in general and supports their growth going forward.”
YEARS OF BAD CONDUCT BY MONSANTO
There are numerous documents and media articles that underscore the lengths to which the agrochemical company has taken to protect its image, and the dangers of Roundup. Documents show that Henry I. Miller, an academic and a vocal proponent of genetically modified crops, asked Monsanto to draft an article for him that largely mirrored one that appeared under his name on Forbes’s website in 2015. Mr. Miller could not be reached for comment.
A similar issue appeared in academic research. An academic involved in writing research funded by Monsanto, John Acquavella, a former Monsanto employee, appeared to express concern with the process see Monsanto internal e-mail expressing concern over Roundup , in the 2015 email to a Monsanto executive, “I can’t be part of deceptive authorship on a presentation or publication.” He also said of the way the company was trying to present the authorship: “We call that ghost writing and it is unethical.”
A Monsanto official said the comments were the result of “a complete misunderstanding” that had been “worked out,” while Mr. Acquavella stated via mail that “there was no ghostwriting” and that his comments had been related to an early draft and a question over authorship that was resolved. Even though there are other documents that refute this version of Monsanto’s “official” statement.
Monsanto has been shown to have actively ghostwritten, drafted and offered direction on formal EPA studies, press releases and other “official” documents, introduced in the pending Roundup federal litigation.
The documents also show internal discussions about Roundup’s safety. “If somebody came to me and said they wanted to test Roundup I know how I would react — with serious concern,” one Monsanto scientist wrote in an internal email in 2001.
The documents also show that A. Wallace Hayes, the former editor of a journal, Food and Chemical Toxicology, has had a contractual relationship with Monsanto. In a further example of Monsanto collusion and influence in 2013, while he was still editor, Mr. Hayes retracted a key study damaging to Monsanto that found that Roundup, and genetically modified corn, could cause cancer and early death in rats.
Selling Assets For Settlement?
Elanco Animal Health Inc., the business Eli Lilly & Co. listed last year, is aiming to reach an agreement soon, where they would combine with Bayer AG’s animal-health unit. The companies hope to announce a deal around the time of Elanco’s Aug. 13 earnings release, the people said, asking not to be identified as the discussions are private. Elanco, which has a market value of about $12.3 billion, plans to pay at least part of the acquisition cost using stock, the people said.
Elanco lost 4.2% Wednesday to close at $31.47. Bayer rose as much as 2.6% early Thursday in Frankfurt.
Bayer would get a significant minority stake in Elanco under the deal being discussed, according to another person. The companies are currently hammering out potential antitrust issues by identifying which businesses they will likely need to sell to gain regulatory approval, the person said.
While Bayer prefers a deal with Elanco, no final agreements have been reached and the talks could drag on or fall apart, the people said. Bayer may proceed with its previous plans for a broader auction process if it can’t agree on terms with Elanco by early September, one person said.
A deal between Elanco and Bayer would preempt a sale process that was expected to be one of Europe’s most hotly contested deal situations this year. It had attracted a flurry of initial interest from buyout firms ranging from KKR & Co. to Blackstone Group Inc. and CVC Capital Partners, which have increasingly been bidding against each other as they try to spend the record amounts of capital the industry has amassed.
Bayer said in a statement that it’s on track with plans to exit the animal-health business and its primary focus is on a sale. The German company also continues to consider all value-maximizing options, it said in the statement, declining to comment further.
Elanco has grown rapidly through at least 10 acquisitions since 2007, including the $5.4 billion takeover of Novartis AG’s animal-health unit. A representative for Elanco, which is based outside Indianapolis, declined to comment.
The sale of Bayer’s animal-health unit was expected to fetch as much as 8 billion euros ($9 billion). The process was initially slated to kick off in the second quarter, people with knowledge of the matter said in March, though Bayer has repeatedly pushed back the start of the auction.
The Bayer business offers medicine and antibiotics to farm animals and pets. The division’s best-selling product line is the Advantage flea, tick and worm treatments for small animals.
Monsanto (Bayer) has been proven time and time again to be directly responsible for corporate sponsored collusion, influence peddling in both the public and private sectors and manipulation of data released to the public regarding the now known carcinogenic links of exposure to Monsanto’s primary product, Roundup and the main ingredient glyphosate.
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