Bayer Takes Fight Back to U.S. Courts After Investor Rebuke

(Bloomberg) -- As Bayer AG management digs in against a growing shareholder rebellion over the acquisition of Monsanto, attention will shift from the German company’s headquarters back to U.S. courts.

That’s where the German pharma and chemicals giant faces 13,400 lawsuits claiming that Monsanto’s Roundup weedkiller causes cancer. Even as it fights the cases, the company’s shareholders handed Chief Executive Officer Werner Baumann an unprecedented rebuke last week.

Bayer rose 2.3 percent to 60.12 euros in early Frankfurt trading. Including the impact of Bayer’s dividend payment, which took effect Monday, the stock fell 2.2 percent. Here’s where things stand.

Bayer Takes Fight Back to U.S. Courts After Investor Rebuke

What Happened?

At a fractious, 13-hour gathering in Bonn on Friday, more than 55 percent of shareholders voted against absolving Baumann and other managers of responsibility for their actions in the $63 billion takeover last year.

Bayer’s board circled the wagons afterward, saying it maintained full confidence in Baumann. Several top investors consider the move a sign that Bayer is unwilling to address shareholder concerns, according to people familiar with the situation.

Will Baumann Have to Go?

The vote was non-binding, but other German CEOs have lost their jobs even after securing more support than Baumann. Several large investors said, however, that they would prefer the chief to remain in place because a change to Bayer’s management board could further delay a resolution to the U.S. litigation and any strategic review.

What Are Shareholders Seeking?

Investors want Bayer to consider an overhaul of the board, take a more forthcoming approach in dealing with the U.S. litigation and conduct a sweeping review -- including a potential breakup of the conglomerate into crop science and pharmaceutical companies, said the people familiar with the situation, who asked not to be identified because the deliberations are private. A Bayer representative declined to comment on investors’ call for changes.

What Happens Next?

Bayer Takes Fight Back to U.S. Courts After Investor Rebuke

Management’s fate may ultimately lie in the hands of U.S. courts, where Bayer has already lost two Roundup cases and lawsuits are proliferating through multiple channels. In one set of proceedings, a U.S. federal judge this month ordered Bayer to pursue mediation, asking the company to try to settle legal challenges that have wiped more than 35 billion euros ($39 billion) off the market value.

Separately, a state court in California is hearing a case brought by a couple in their 70s who both have cancer. The jury is expected to rule as soon as next month.

Bayer denies that Roundup causes cancer and the company has been holding out hope for a court win that would give Baumann some breathing space as the company hones its legal response to the swelling wave of litigation. A third loss, however, could force the company to accelerate talks on a global settlement, which analysts have said could top $5 billion.

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