Takeover bid lacked support of German company’s CEO at the time — and now Bayer shares are in a rut
EXCERPT: “Bayer’s reputation with investors has been diminished,” said Markus Mayer, an analyst with Baader Bank. “The market doesn’t know how this story will end, no one wants to get in right now.”
Bayer pursued Monsanto despite weedkiller suits and executive’s concern
By Ruth Bender
Wall Street Journal, 25 Nov 2018
https://www.wsj.com/articles/bayer-pursued-monsanto-despite-weedkiller-suits-and-executives-concern-1543147201 [excerpt only]
* Takeover bid lacked support of German company’s CEO at the time — and now Bayer shares are in a rut
When Werner Baumann, as a senior executive at Bayer AG (BAYRY 2.56%), was mulling a plan to acquire Monsanto, the idea so troubled Bayer’s chief executive at the time that he didn’t want to be associated with it, according to people familiar with the matter.
Nearly three years later, the concern appears prescient.
Bayer went on to buy Monsanto once Mr. Baumann became CEO in 2016, with the $63-billion acquisition closing earlier this year. But as the fusing of the two businesses proceeds, the deal that was meant to turn the inventor of Aspirin into the No. 1 provider of crop seeds and pesticides has become one of Bayer’s biggest problems.
Earlier this month, Bayer said some 9,300 plaintiffs were suing it for damages, alleging that Monsanto’s Roundup weedkillers had given them cancer. In August, a U.S. jury in the first such case to go to trial found in favor of the plaintiff. Bayer has lost some $30 billion in market capitalization since then.
Supporters of the deal inside and outside the company say these are short-term setbacks that don’t diminish its strategic merits and that Bayer has successfully fought tough litigation in the past.
But investors fear Mr. Baumann’s gamble has saddled the German company with a hard-to-quantify exposure that will hang over the business for many months. They also worry that the proceedings will steal management’s focus at a time when sales of Bayer’s over-the counter drugs are slipping and the company is feeling pressure to boost its pipeline of new drugs.
Bayer has rejected the Roundup complaints as meritless, arguing there are hundreds of scientific studies that demonstrate glyphosate, the compound contained in the weedkillers, is safe to use. But Mr. Baumann said this month the lawsuits would occupy the company beyond 2021 as they work their way through the courts.
“Bayer’s reputation with investors has been diminished,” said Markus Mayer, an analyst with Baader Bank. “The market doesn’t know how this story will end, no one wants to get in right now.”
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