Bayer reels as $2bn Roundup damages awarded to California couple

Shares in German drugs and chemicals giant Bayer AG fell by 3% yesterday, after a jury awarded a Californian couple more than $2bn (£1.55bn) in damages over allegations that weedkiller Roundup caused them both to develop cancer.

The news unsettled Bayer's shareholders, who are reeling from controversies since the company’s acquisition of Monsanto, the maker of Roundup, in 2018. This is the third time in a row a jury has awarded against Monsanto, and there are more than 13,000 Roundup-related cases in the US yet to be heard, with the number increasing.

Bayer, whose stock plunged to its lowest point for seven years after the ruling, responded after Monday’s ruling, saying it was "disappointed with the jury's decision", adding that the punishment was “excessive and unjustifiable”, and insisting that it would appeal the verdict.

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The company’s stock “is down more than 40 per cent since the group’s $63bn deal to buy Monsanto, which brought Roundup and the related litigation into the Bayer orbit in the first place,” writes Tobias Buck in the Financial Times. “The combined group is now worth less than Bayer paid for its US rival only last year.”

Bayer lawyers questioned a juror after the trial. They asked what the company could do to put forward a more convincing case - the juror told them “I wanted you to get up and drink it.”

The punitive damages, $1bn each to Alva and Alberta Pilliod, who suffer from non-Hodgkin’s lymphoma after years of residential landscaping using Roundup, exceed the compensatory damages of $55m by a factor of 37, and as such will likely be reduced in the appeals court by a judge.

Bloomberg reports that “the verdict will be vulnerable to a legal challenge by Bayer because courts have generally held that punitive damages shouldn’t be more than ten times higher than compensatory damages.”

Nevertheless, jurors’ stance on glyphosate, the purportedly carcinogenic ingredient in Roundup, now appears to favour plaintiffs. This has led analysts at Bloomberg to raise “their estimate for a settlement value to as much as $10bn, up from a peak of $6bn.”

“In further fallout from the takeover,” Reuters says, “Bayer said on Monday that Monsanto, which is being investigated by French prosecutors for compiling files of influential people such as journalists and scientists in France, likely did the same across Europe, suggesting a potentially wider problem.”

The controversy and legal ramifications are causing turmoil at Bayer. CNN reports that in April “over 55% of voting shareholders refused to endorse the actions of management at the company's annual meeting, a rebuke that Berenberg analyst Sebastian Bray described as "unprecedented" in Germany.”

Bayer acquired Monsanto to grow and protect itself from acquisition - exactly the thing to which it is now vulnerable.

“Investors want to know whether management did their homework on Monsanto before moving ahead with a $63bn merger, which closed in 2018. Some believe it's time to consider dramatic structural changes, such as dividing up Bayer's pharmaceutical and agriculture businesses.”