The 2016 acquisition by Bayer of seed and chemical giant Monsanto has turned out to be a rotten deal. Shares in the German company have fallen 30 percent since the $63 billion deal closed, and are now at just 50 percent of their value in 2015, when the company was Germany’s most valuable.
The Wall Street Journal reports that ongoing litigation against Monsanto is the primary factor contributing to the parent company’s declining value. More than 18,000 plaintiffs have filed suit alleging that Roundup, the company’s flagship herbicide, causes cancer. A jury awarded one plaintiff $289.2 million in damages in 2018, spooking markets and Bayer shareholders. The award was later reduced to $78.5 million.
“Bayer has defended the deal and proclaimed the safety of Roundup. It announced a restructuring late last year in a bid to boost profits, selling various assets and cutting 10 percent of its workforce,” the Journal writes. Yet “[t]he share price continued to fall.”
The Monsanto acquisition is the largest by a German company since World War II. Despite receiving a no-confidence vote from shareholders in April, Bayer CEO Werner Baumann remains in his post.
The Bayer-Monsanto merger was broadly opposed by environmentalists, farmers, scientists, policy advocates, and legislators. Consolidation in the seed and agrochemical sector is not limited to this one deal; major mergers between ChemChina and Syngenta and between Dow and DuPont have created a market dominated by three global players.