Temasek’s investee Bayer loses 10% share value in 1 day after bad news from US court

It was reported on Tue (19 Mar) that Bayer’s subsidiary, Monsanto, has lost its second court case in US over a lawsuit filed by a Californian man who suffered from cancer. The court found that Monsanto’s Roundup weed killer was a substantial factor in causing cancer in the Californian man.

Monsanto is facing more than 11,000 similar lawsuits across the US.

After the trial, the president of the NGO Environmental Working Group, Ken Cook, said, “Today’s verdict reinforces what another jury found last year, and what scientists with the state of California and the World Health Organization have concluded: Glyphosate causes cancer in people.”

“The decision by Bayer to purchase Monsanto, a company with a long history of environmental malfeasance, could go down as one of the worst business decisions ever made. The day of reckoning for Bayer and its cancer-causing weed killer is getting closer,” he added.

In fact, it was Singapore’s Temasek Holdings which helped Bayer to acquire Monsanto. 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 was used as part of Bayer’s plan to takeover Monsanto.

After the market started trading following the negative news received from the trial, Bayer’s shares dropped close to 10% in 1 day:

Bloomberg reported yesterday (20 Mar) that Bayer’s shares are on course for their worst decline since 2003. “Banks are cutting their ratings and slashing price targets for the stock amid predictions that the firm could face more than $5 billion in settlements,” it said.

What some bankers and analysts are saying about Bayer’s shares:

Michael Leacock of MainFirst: “There’s negligible chance of Bayer resolving/capping this issue in the near-term and investors are likely to stay away until there is more clarity.”

Markus Mayer of Baader: “News is a major blow, and the stock’s fall toward its 2018 low could increase the chance of it becoming a target for activists or a takeover.”

Keyur Parekh of Goldman Sachs: “Overhang on Bayer shares could be significant as outcome was considered by some investors to be a potential bellwether for about 765 outstanding glyphosate cases.”

Michael Shah of Bloomberg Intelligence: “Bayer could face settlements of over $5 billion (vs. 2018 Ebitda of 9.5 billion euros), adding to credit concerns and questions on 2022 deleveraging goals.”

Martin Schnee of Alphavalue: “Downgrades to reduce from add due to uncertainty over final settlements… company’s lowered valuation could trigger its break-up.”

Meanwhile, Bayer continues to deny that Monsanto’s weed killer causes cancer.

The next Roundup trial is scheduled to begin in California state court in Oakland on March 28 next week, involving a couple who claim Roundup has caused their non-Hodgkin’s lymphoma. Even as more cases are waiting to be heard in US courts, more cancer sufferers are also queuing to file suits against Monsanto.

It’s not known what Temasek would do with its investment stake in Bayer, as more people sue Monsanto.