Two pensioners have inflicted a severe blow on the traditional German company Bayer. Alva and Alberta Pilliod, a 70-year-old cancer sufferer, convinced Oakland, California, that Monsanto's herbicide Glyphosate is responsible for her illness.
It is the third such process that Monsanto or Bayer loses. Bayer acquired the controversial US pesticide and seed company last August.
But the dimension is new: The jury awarded the couple, who claims to have used the glyphosate-rich weed killer Roundup on their property near San Francisco for 35 years, two billion dollars (€ 1.78 billion) in damages Billion more than the claimant's attorney had requested.
This is a "new dimension," says Marc Tüngler, CEO of the German Protection Association for Securities Ownership (DSW), "Bayer is standing with his back to the wall".
How is the sum?
Two billion dollars is a huge sum, but not the highest, imposed in the US. Five years ago, Reynolds was convicted of paying $ 23 billion to the widow of a chain smoker. That the sums of compensation in the US are so high, is also due to a peculiarity of the American system. Unlike German law, it knows the so-called punitive damages, with which companies should be punished for intentional, reprehensible behavior.
This punitive damages makes up the absolute lion's share in the Pilliod case. The actual compensation for retirees is "only" 55 million dollars. For shareholder protector Tüngler, however, the "absurdly high amounts of compensation" are an alarm signal. "The high sums show how bad the image of Monsanto and Bayer in the US is," he says. But it is also clear that what the jury awards, has almost never existed. In appeal or settlement proceedings, the sums are drastically reduced.
What is Bayer doing?
Bayer wants to defend itself against the verdict. As in the previous two proceedings, the German company will first appeal to the competent judge with the aim that the latter either completely waives the verdict or at least reduces the sum. In the first trial last August, when janitor Dewayne Johnson won against Bayer, the judge lowered the total from $ 289 million to around $ 78 million.
Nevertheless, that was only a partial success for Bayer. In all cases so far, Germans are calling where they meet professional judges instead of laymen. Bayer hopes in the second instance for a verdict that certifies that glyphosate is not carcinogenic. The Dax Group relies on a large number of corresponding studies by the regulatory authorities worldwide.
Why does not Bayer make a comparison?
After three lost trials, Bayer simply can not afford a comparison. The sums to pay would be too high. In settlement negotiations, Bayer is likely to occur only when the Group has won in court. This is what the pharmaceutical and agrochemicals company did in the case of lawsuits against its blood thinner Xarelto. After seven won trials, Bayer has closed a $ 750 million settlement. Half of the sum has been taken over by the US distributor Johnson & Johnson. In the end, Bayer has come out virtually harmless, because you had not only received money from the insurance, but could offset the damages for tax losses as a loss.
How many people complain in the US?
More than 13,400 lawsuits are pending in the US. These are all individual, not class actions. The difference: Even if Bayer would accept all previous plaintiffs, new, further lawsuits threatened.
When will it be dangerous for Bayer?
If one believes the rating agency Moody's, Bayer can withstand compensation payments up to a level of five billion dollars. "With every negative verdict, confidence that future settlement will be around $ 5 billion lower, as estimated by many analysts," warned fund manager Markus Manns of Union Investment on Tuesday. According to Moody's, a $ 20 billion payment could be difficult for Bayer. Bayer has so far made only provisions for the legal costs, but not for possible compensation payments. According to international accounting law, this is not possible for the jury judgments of the first instance, according to Leverkusen.
Is Bayer swallowed?
Bayer is still worth about 50 billion euros on the stock market, less than the 63 billion dollars that have been spent on Monsanto. Since the first defeat in the glyphosate trial against Dewayne Johnson, the stock has lost 40 percent, on Tuesday it fell sharply again, and the paper slumped to a seven-year low. Markus Mayer of Baader Helvea believes that Bayer may now increasingly be targeted by activist investors or taken over completely.
The hedge fund Elliott, according to insiders, with less than three percent at Bayer, but holds so far covered. Paradoxically, the litigation surrounding glyphosate is currently the most effective way to protect it from taking over. Because nobody wants to burn their fingers. But that could be different if Bayer wins in the second instance. The first such judgment is expected in August or September.
Does the board have to go?
Bayer CEO Werner Baumann is on probation. At the AGM at the end of April, the major German funds had already criticized the Bayer management for underestimating the legal risks associated with the Monsanto takeover. The board was not relieved, a hitherto one-time operation at a DAX Group.
Nevertheless, the big investors had decided to leave Baumann in office so that he can pull the cart out of the mud. "Should Bayer lose in the second instance, the patience of shareholders is at an end and it will be more than tight for the Board of Management and Supervisory Board," says shareholder representative Tüngler.