Pesticide ruling scares investors
Investors fled shares in German chemicals and pharmaceuticals giant Bayer on Monday, fearing a massive damages ruling against one of newly acquired US firm Monsanto’s flagship products could signal a wave of lawsuits.
The stock plunged, lopping about $10bn (R142.4bn) off its market value.
A California jury on Friday awarded dying groundskeeper Dewayne Johnson damages of almost $290m (R4.13bn), saying Monsanto should have warned buyers that its flagship Roundup weedkiller could cause cancer.
While observers have predicted that thousands of other suits could follow, Bayer said the jury’s findings went against scientific evidence and that other courts might arrive at different conclusions.
Nevertheless, “if it’s a quarter of a billion dollars per case, you don’t need to lose many lawsuits before it becomes quite expensive”, analyst Michael Leacock, of MainFirst bank, said.
He said that Monsanto faced about 4,000 US lawsuits at the state level and 450 socalled multi-district cases at the federal level.
“The total cost, in our view, could easily reach $10bn [R142.4bn]” if Bayer were to settle out of court with a still larger number of plaintiffs, he predicted.
What is more, if Roundup is “seen or if it’s thought by consumers to be dangerous, there’s a risk to long-term business,” he said – a second reason for investors to shy away from Bayer for now.
The latest court decision came just more than two months after Bayer sealed its $63bn (R897.2bn) takeover of Monsanto, one of the largest in German corporate history.
Aware of the often poisonous reputation of the US firm, which makes genetically modified seeds and crop protection technologies like pesticides, Bayer plans to ditch the Monsanto name once the takeover is complete.
Environmentalists have vowed to keep up their pressure on the new giant unless it makes a drastic departure from Monsanto’s past.
Groundskeeper Johnson, diagnosed in 2014 with nonHodgkin’s lymphoma – a cancer that affects white blood cells – said he had repeatedly used a professional form of Roundup while working at a school in Benicia, California.
His lawsuit built on 2015 findings by the International Agency for Research on Cancer, part of the UN World Health Organisation, which classified Roundup’s main ingredient glyphosate as a probable carcinogen, causing the state of California to follow suit.
Nevertheless, “on the basis of scientific conclusions, the views of worldwide regulatory authorities and the decadeslong practical experience with glyphosate use, Bayer is convinced that glyphosate is safe and does not cause cancer”, the company said on Saturday.
Much of the value for Bayer in the Monsanto deal comes from the US firm’s portfolio of genetically modified seeds, many of which are designed to resist pesticides like glyphosate.
But glyphosate has long been in the sights of environmentalists, with Brussels last year renewing its licence for use in the EU for just five years rather than the usual 15 after intense lobbying. –