Bayer hoped to resort to science to establish the safety of its Roundup herbicide, but clearly cannot against a good lawyer after a judge awarded more than $2 billion in damages to a couple who claimed that the product contributed to their Cancer.
The verdict, the third in possibly thousands of cases involving the glyphosate-based herbicide, is the crudest reminder that the German chemist-pharmacist was gravely mistaken in evaluating the risks of acquiring the manufacturer of the Product, Monsanto, last year.
Bayer stresses that the particular case cannot be extrapolated to others. The damages in this case are off-scale compared to other failures. The amount may decrease after an appeal, as has happened before. The punitive sum in the first adverse verdict was reduced from US $250 million to US $39 million.
Still, the company’s market value fell by US $1.6 billion on Tuesday morning. The question for investors is whether the costs of a large agreement covering all allegations about Roundup and any deterioration in the value of its future glyphosate-related business exceed US $42 billion of the group’s market value since They would complicate things from a judicial standpoint in August. Analysts from UBS Group point out that the current valuation considers an agreement of over 10 billion euros (US $11,000 million), withdrawal of Roundup and a significant discount to the conglomerate.
The case again highlights the difference between science and law. Bayer claims that Roundup is safe if used in accordance with the instructions, citing a recent study by the U.S. Environmental Protection Agency and 40 years of previous scientific data. It accuses plaintiffs ‘ lawyers of carefully choosing evidence and supporting an unfavorable assessment of the World Health Organization which, he says, is in conflict with scientific consensus.
That is the problem of lawyers: they can be selective and persuasive. Bayer is a chemical and foreign company. He’s not going to win anyone’s sympathy. Any assessment of the legal risks of buying Monsanto, which also does not have the people’s approval, should have taken these factors into account.
Bayer has previously said that its administrative board assessed these threats using the expert opinion of an American law firm. When an agreement was reached in September 2016, the number of glyphosate-related claims was only about 120 and the courts still did not decide on the initial merits of these cases. It is not yet clear whether the board did the right thing by drawing the conclusions it drew from that private consultancy.
Other foreign companies that shuffle US target acquisitions will surely falter more. They will have to consider the judicial risks even more when deciding how much to pay.
Bayer’s latest setback does not change the fact that dissolving the current board would probably weaken its position, but adds pressure. The stock price has fallen 10% since shareholders issued a protest vote against the board at last month’s annual meeting. Unless there is a recovery before the next meeting, the pressure for changes will likely be unbearable and fall into the chairman of the group’s board of directors, Werner Wenning.
If buying Monsanto had to do with the need to reinforce Bayer to avoid a takeover, it now seems that the strategy ended up being detrimental. Maybe he did nothing but make it more affordable for a predator once the allegations were resolved. Right now Bayer has many scientists, but what it needs most is to have the best lawyers.
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