Bayer | Crop Life | Jackie Pucci | June 24, 2020
“Bayer AG has agreed to pay between $10.1 and $10.9 billion to settle thousands of U.S. lawsuits claiming that its widely-used herbicide Roundup caused cancer after more than a year of talks.
The German drugs and pesticides maker also resolved dicamba drift litigation with payment of up to $400 million and most and polychlorinated biphenyl (PCB) water litigation exposure for payment of approximately $820 million.
Bayer has come to terms with about 75% of the 125,000 Roundup suits filed and unfiled claims overall, it said in a statement on Wednesday of the deal to end legal disputes it inherited with its $63 billion takeover of Monsanto in 2018.
The settled cases over Roundup and other glyphosate-based weedkillers account for about 95% of those currently set for trial, it added. The resolution also puts in place a mechanism to resolve potential future claims efficiently.
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Dicamba Settlement
Bayer also announced a mass tort agreement to settle the previously disclosed dicamba drift litigation involving alleged damage to crops. The company will pay up to a total of $400 million to resolve the multi-district litigation pending in the U.S. District Court for the Eastern District of Missouri and claims for the 2015 to 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. The company expects a contribution from its co-defendant, BASF, towards this settlement.
The only dicamba drift case to go to trial – Bader Farms – is not included in this resolution. The company believes the verdict in Bader Farms is “inconsistent with the evidence and the law” and will continue to pursue post-trial motions and an appeal, if necessary.
Bayer said it stands strongly behind the safety and utility of its XtendiMax herbicide with VaporGrip technology and continues to enhance training and education efforts to help ensure growers use these products successfully.
Funding Sources
Cash payments related to the settlements are expected to start in 2020. Bayer 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 can make use of existing surplus liquidity, future free cash flows, the proceeds from the Animal Health divestment, and additional bond issuances, which will provide flexibility in managing the settlement payments as well as upcoming debt maturities.
Based on publications by the rating agencies and the company’s communication with them, Bayer expects to keep investment grade credit ratings. With its strong underlying business, the company intends to keep its dividend policy. At the same time, deleveraging the balance sheet remains a high priority.
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