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Mergers & Acquisitions

Bayer shareholders reproach management over Roundup woes

German company’s acquisition of Monsanto brought legal liabilities and a share price slide

by Melody M. Bomgardner
April 29, 2019

20190429lnp1-baumann.jpg
Credit: Bayer
Bayer CEO Werner Baumann spoke at the company's recent shareholders' meeting.

A majority of Bayer shareholders do not like the way the company has been run over the past year. In a vote at the company’s annual shareholders’ meeting late last week, 55% refused to back management, largely because of Bayer’s problematic decision to buy Monsanto.

The acquisition came with a torrent of lawsuits over the role played by Monsanto’s Roundup brand glyphosate herbicide in incidents of nonHodgkin’s lymphoma and other illnesses among agriculture workers.

Indeed, only two months after the $63 billion acquisition closed in June, a US jury found Bayer responsible for a groundskeeper’s cancer. A second case also went against Bayer; the company is appealing both verdicts. And that’s just the beginning: roughly 13,400 plaintiffs are waiting in the wings.

Disgruntled shareholders feel Bayer did not properly price the financial and reputational risks of the coming litigation. Shareholder countermotions, filed ahead of the meeting, call the Monsanto acquisition “catastrophic,” a “disaster,” and “ill-fated.”

The mood at the meeting itself was no better. “Management infected a healthy Bayer with the Monsanto virus, is now playing doctor but has no healing drug at hand,” said Ingo Speich, head of corporate governance at Deka Investment, which holds roughly 1% of Bayer, according to reports from the event.

Shareholders are particularly miffed that Bayer’s stock price has been on a downward slide since the deal, orchestrated by CEO Werner Baumann, was completed. The nearly 40% drop has wiped out market value at the company worth about $62 billion, close to the price paid for Monsanto.

The negative feedback is unusual. At last year’s shareholders’ meeting, 97% of shareholders backed management’s actions. The votes are nonbinding, according to German law.

Bayer’s supervisory board responded to the vote with a unanimous declaration of support for Baumann. Chairman Werner Wenning told assembled shareholders that the company will work to restore confidence. “While we take the outcome of the vote at the annual stockholders’ meeting very seriously, Bayer’s supervisory board unanimously stands behind the board of management,” he said.

Bayer first revealed its desire to buy Monsanto in May 2016. At the time, the merger of Dow and DuPont had kicked off a wave of consolidation among agriculture giants. Bayer wanted to add Monsanto’s strong seeds and traits capability to shore up its crop protection chemicals business. At the time, Baumann pushed back against the preference of some shareholders that Bayer invest instead in its health care business.

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