Bayer stocks PLUMMET after Roundup ruling A federal jury has decided against agrochemical giant Monsanto, concluding that the company's weed killer contributed to the cancer of 70-year-old Edwin ...
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CreditSights in a note writes: "This isn't the way Bayer expected the first bellwether trial of the federal [multidistrict litigation] cases to go, particularly in light of the fact that this was one of the better chessboards it was facing at trial." At the end of last year there were 11,200 cases related to glyphosate in multiple districts. That is the Roundup ingredient that plaintiffs argue causes cancer, according to Citigroup analysts.
Market Watch: In retrospect, Bayer's purchase of Monsanto violated nearly every rule of M&A. Bayer was a venerable, if fading, chemical and drug giantmost famous in the U.S. for Bayer aspirin. By the time it acted, it needed a megadeal. In Monsanto, it was chasing a savvy, M&A- and research-and-development-driven company with major global seed and farm-chemicals businesses.
Bayer's Latest Legal Setback Spooks Financial Markets (Barron's article by Alexandra Scaggs 3/20)
Here's What the Street's Saying About Bayer's Share Price Plunge (Bloomberg, By Joe Easton 3/20)
Analysts sound alarm bells over Roundup weed killer ruling---Shares plummet as settlements seen reaching $5 billion-plus
Bayer (ticker: BAYRY) shares are down nearly 10% today after a California jury found that its subsidiary Monsanto's Roundup weed killer product was responsible for a plaintiff's non-Hodgkin lymphoma. Bayer's debt prices got hit, as well, Bloomberg data show.
The back story: The Roundup product was created by Monsanto, which was purchased by Bayer last year in a deal worth more than $60 billion, largely financed by debt. At the time of the €20 billion ($22.7 billion) bond sale, investors and analysts were aware of the risk of litigation against Monsanto. Since the deal, Bayer has retired the Monsanto brand name.
What's new? On Tuesday a northern California jury found that Monsanto's Roundup product was a "substantial factor" in causing plaintiff Edwin Hardeman's cancer.
Looking ahead: It isn't clear yet how much Bayer will need to pay in this case. The second part of the trial, in which the court will determine punitive damages, begins today. Bayer signaled its willingness to appeal the ruling in a statement that said it would continue to "rigorously defend" its Roundup product.
Citigroup argues that a St. Louis trial beginning on April 1 will be a better gauge of Bayer's potential liabilities. The analysts write that about €22 billion of litigation risk is already priced into Bayer's stock.