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It was reported by the Australian Financial Review on Mon (21 Jan) that the CEO of German drug-maker Bayer, Werner Baumann, has been in Singapore and Australia over the past week to reassure "big investors" that his company would be able to meet its growth targets, despite facing multiple lawsuits by its subsidiary Monsanto.
In Singapore, the biggest investor of Bayer is Temasek Holdings, the national sovereign wealth fund of Singapore.
It was reported in Apr last year that Bayer sold 3.6 per cent stake to Temasek for 3 billion euros at 96.77 euros per share. The money is used as part of Bayer's plan in a US$62.5 billion takeover of Monsanto. Together with its existing holding in Bayer, Temasek would then own about 4 percent in Bayer after the transaction. By Jun, with Temasek's help, Bayer successfully acquired Monsanto to become the biggest seed and agricultural chemical maker in the world.
However, in Aug last year, a California court ruled against Monsanto and decided that its weed killer, "Roundup", has indeed caused cancer in a former school groundskeeper, Mr Lee Johnson. Mr Johnson's lawyers argued that Monsanto actually knew of the cancer risk posed by Roundup as far back as the 1970s, but failed to inform the public and instead engaged in a "deliberate effort to distort the truth” as the weed killer generated hefty returns.
The California court awarded US$289 million as damages to Mr Johnson. It was later reduced to US$78 million, and Bayer, which denies the allegations, said it would appeal the decision.
But close to 10,000 more people have also filed similar lawsuits and investors have now viewed Bayer shares as high-risk stocks they don't want to include in their portfolios. This has made the past year one of the most difficult in Bayer Group's 155-year history.
Bayer has shed more than 30 billion euros from its market capitalization since after losing the first lawsuit in the California court. So far, Bayer has cut huge numbers of jobs and sold off parts of the company. It even announced buying back its own shares. But none of these measures has helped to stop the free fall of its share price:
As at yesterday's closing (22 Jan), Bayer's share price was 65.96 euros. Since Temasek bought 3 billion euros worth of shares at 96.77 euros in Apr last year, that means it has lost 30.81 euros per share or 31.8% of the 3 billion euros investment. So, in 9 months, Temasek has lost at least 955 million euros or S$1.5 billion.
Meanwhile, Bayer CEO Baumann has signaled a more "rigorous defence" of the chemical glyphosate used in Monsanto's weed killer in the impending lawsuits. He continued to deny that glyphosate causes cancer in those cancer sufferers who are suing Monsanto.