- Bayer concludes comprehensive glyphosate comparison.
- Further agreement for Dicamba and PCB.
- Future US proceedings are more likely to fail for Bayer.
- The costs are offset through cost-cutting measures.
The Monsanto takeover completed in 2018 brought for the Bayer (WKN: BAY001) group so far only difficulties. It wasn’t cheap at $ 63 billion, and shortly afterwards, more and more glyphosate lawsuits came up. In the end it was 125,000.
In the long run, however, Bayer still achieves all of its goals because Monsanto’s seed business is very valuable. The group is now the global market leader in this sector and can use this status for itself over the coming years.
Bayer concludes comprehensive glyphosate comparison
Today (June 24, 2020) there was good news for Bayer shares in the long-standing US glyphosate lawsuit. The group has agreed a payment of $ 8.8 to $ 9.6 billion with the court-appointed negotiator Kenneth R. Feinberg. This includes a flat rate for all lawsuits not yet filed.
In return, about 75% of all 125,000 Roundup claims have been settled. Bayer preferred to compare other long-term processes because these would have been associated with an uncertain outcome. The agreement also contains important guidelines for settling all other and future proceedings, which was very important to Bayer.
It is also encouraging that a separate agreement has been reached for all future lawsuits for an additional $ 1.25 billion. Among other things, it provides for a scientific committee to assess whether Roundup is carcinogenic or not, which in turn speaks for Bayer. The agreement only requires the approval of Judge Vince Chhabria from the US District Court for the Northern District of California. Bayer plans to transfer $ 5 billion in 2020 and 2021, as well as the remaining $ 10.9 billion in 2022.
“For Bayer, the round-up comparison is the right step at the right time to end a long period of uncertainty,” said Bayer CEO Werner Baumann.
Further agreement for Dicamba and PCB
Bayer continued to reach agreement on its Dicamba and a significant portion of its PCB lawsuits. Here the company will pay up to $ 400 million or about $ 820 million. The co-accused is added to the $ 400 million BASF (WKN: BASF11) very likely to contribute a part.
Future US proceedings are more likely to fail for Bayer
The agreements do not apply to the Johnson, Hardeman and Pilliod cases. Therefore, you will continue to go through appointment procedures. But here, too, Bayer benefits from the fact that it is not the jury but the professional judge in the higher courts. They are more likely to rely on expert opinions and authorities that speak for Bayer. For example, the US Environmental Protection Agency has classified glyphosate as non-carcinogenic when used properly.
A recent California court ruled that Roundup (glyphosate) doesn’t even need a warning of a possible cancer risk to be sold. The state of California had previously pushed for this after the WHO cancer research agency IARC Roundup had rated 2015 as “probably carcinogenic”.
The discussion shows that the situation is apparently not as clear as Bayer would like it to be. Proper use of glyphosate ensures that people do not come into direct contact with the agent, but this can hardly be prevented with a large-scale application.
The costs are offset through cost-cutting measures
But one thing is also clear: Bayer will use financing measures to get the court costs back. For example, the company announced in 2019 that it plans to cut annual spending by EUR 2.6 billion by 2022. In addition, the animal health care business was sold for $ 7.6 billion, which alone covers almost all costs.
In the long term, Bayer will probably say goodbye to Roundup. The group has already announced that it intends to invest 5 billion euros in the development of better weed control agents and processes within the next ten years.
The post For up to $ 10,900 million, Bayer shares are closing their US glyphosate files appeared first on The Motley Fool Germany.
Christof Welzel does not own any of the shares mentioned. The Motley Fool does not own any of the stocks mentioned.
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