Bayer To Pay Up to $10.9 Bn To Resolve Roundup LitigationBy
Bayer has agreed to pay between $10.1 billion and $10.9 billion to resolve current and future product-liability litigation in the US over its glyphosate-based herbicide, Roundup, which the company acquired in its $63-billion acquisition of the agrochemical and seed company, Monsanto, in 2018. The acquisition of Monsanto made the company’s crop-protection business the largest piece of Bayer, surpassing its pharmaceuticals business, which had been the company’s largest business. In 2019, the company’s crop-protection segment posted revenues of EUR 19.83 billion ($22.25 billion), its pharmaceuticals segment of EUR 17.96 billion ($20.15 billion) and its consumer health business of EUR 5.46 billion ($6.13 billion).
The settlement will bring closure to approximately 75% of the current Roundup litigation involving approximately 125,000 filed and unfiled claims overall. The resolved claims include all plaintiff law firms leading the Roundup federal multi-district litigation or California cases, and those representing approximately 95% of the cases currently set for trial, according to information from Bayer. The settlement also establishes values and parameters to guide the resolution of the remainder of the claims as negotiations advance.
Under the agreement, Bayer will make a payment of $8.8 billion to $9.6 billion to resolve current Roundup litigation, including an allowance expected to cover unresolved claims. Additionally, Bayer will make a payment up to $1.25 billion to support a separate class agreement to address potential future litigation. Bayer says the claims still subject to negotiation largely consist of cases generated by television advertising and for which plaintiffs’ law firms have provided little or no information on the medical condition of their clients, and/or cases held by law firms with small inventories.
In addition, Bayer announced a mass tort agreement of $400 million to settle litigation over dicamba, a broad-spectrum herbicide, under claims that alleged damage to crops. The company will pay up to a total of $400 million to resolve the multi-district litigation pending in the US District Court for the Eastern District of Missouri and claims for the 2015–2020 crop years. Claimants will be required to provide proof of damage to crop yields and evidence that it was due to dicamba in order to collect. Bayer says it expects a contribution from its co-defendant, BASF, toward this settlement.
Bayer also announced a series of agreements that resolve cases representing most of the company’s exposure to litigation over polychlorinated biphenyls (PCB) stemming from Monsanto. Monsanto legally manufactured PCBs until ceasing their production in 1977. One agreement establishes a class that includes all local governments with Environmental Protection Agency permits involving water discharges impaired by PCBs. Bayer will pay a total of approximately $650 million to the class, which will be subject to court approval.
Concurrently, Bayer has entered into separate agreements with the Attorneys-General of New Mexico, Washington, and the District of Columbia to resolve similar PCB claims. For these agreements, which are separate from the class, Bayer will make payments that together total approximately $170 million.
Cash payments related to the settlements are expected to start in 2020. Bayer says it currently assumes that the potential cash outflow will not exceed $5 billion in 2020 and $5 billion in 2021; the remaining balance would be paid in 2022 or thereafter. In order to finance these payments which are subject to tax treatment, Bayer says it can make use of existing surplus liquidity, future free cash flows, the proceeds from the sale of its animal-health business, and additional bond issuances, which will provide flexibility in managing the settlement payments as well as upcoming debt maturities.