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More than 55% of the voting shareholders did not approve the management's actions at last Friday's annual meeting, which Berenberg Bank analyst Sebastian Bray described as "unprecedented" in Germany.
Investors are right to be upset. Bayer's share price has plummeted 40% since the conclusion of the deal with Monsanto in June 2018. The company is now worth more than what it's worth. paid for the American chemical manufacturer.
Although non-binding, the shareholder vote increased the pressure on CEO Werner Baumann and forced Bayer's supervisory board to issue a statement reiterating its support for the management team.
Roundup trial
The purchase of Monsanto, which took almost two years to approve by the regulators, did not always look like a failure.
But last year's events cast serious doubt on the wisdom of this purchase.
This could be just the beginning. Bayer faces glyphosate lawsuits filed by approximately 13,400 US plaintiffs.
The company says that scientific research proves that glyphosate is safe when used according to the instructions and that it is not carcinogenic. But he could still choose to settle the thousands of pending cases, according to analysts.
Damien Conover, an analyst covering Bayer for Morningstar, estimates he should pay € 2 billion ($ 2.2 billion) in litigation costs for glyphosate.
In the worst case, Conover predicts that costs could exceed 13 billion euros (14.6 billion dollars). It is difficult to quantify the exact amount of liability without knowing more about the quality of the files, he said.
Moody 's said Tuesday in a report that settlement payments of 5 billion euros ($ 5.6 billion) would be manageable, but that 20 billion euros ($ 22.4 billion) ) in payments could affect the credit rating of the company.
The question for investors is whether management has done its homework on Monsanto. Some believe that it is time to consider dramatic structural changes, such as the division of Bayer's pharmaceutical and agricultural activities.
"They are of the view that US legal responsibilities are difficult to quantify and that it is unlikely that they will disappear any time soon," Bray said.
1st shareholder
Concerns about the company's legal exposure were fully exposed at last week's shareholders meeting.
Ingo Speich, who represented Deka Investment at the event, said that he had voted against the management because the Monsanto deal had been "destructive of value".
Deka is demanding "a lot more transparency" on the potential financial impact of litigation, Speich said. "The biggest problem with the price of action is uncertainty," he added.
Baumann, the CEO, acknowledged that the Roundup lawsuits and the first verdicts imposed a "heavy burden" on the company and its investors. But he said the market reaction was "exaggerated".
He argued that the company was right to buy Monsanto and that this acquisition was already contributing to the profitability of the company.
Investors are unlikely to reward the performance of the company before its legal liability becomes clear.
"The market is not able to give much credit to society as clouds of uncertainty hover over its business," said Bray.
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