Bayer Mulls Bankruptcy for Monsanto to Shield from Glyphosate Lawsuits
Bayer Might File Bankruptcy for Monsanto to Dismiss Glyphosate Lawsuits
Bayer's purchase of Monsanto has become a thorn in its side. The pharmaceutical giant is dealing with a tidal wave of lawsuits linked to Monsanto's weedkiller, glyphosate, and the financial risks are undetermined. If a settlement with the majority of the plaintiffs proves elusive, Bayer may opt for a contingency plan.
According to recent reports from the Wall Street Journal, Bayer is considering filing for bankruptcy for its U.S. subsidiary, Monsanto, to offload potential billions in damages connected to glyphosate. Sources familiar with the matter have shared this information.
Glyphosate, marketed in the U.S. as Roundup, is under suspicion for causing cancer. However, Bayer maintains that it's not carcinogenic, with U.S. and other authorities not classifying it as such. Despite Bayer's stance, the company has already dished out around $10 billion (approximately $8.9 billion) in glyphosate-related cases and faces an additional 67,000 pending cases. Bayer has set aside $5.9 billion for these liabilities.
A recent court decision in Georgia ordered Bayer to pay over $2 billion to a plaintiff who alleged cancer development from Roundup. Bayer is currently appealing this verdict. Most of the other cases are ongoing in a Missouri court, where Bayer is seeking a settlement.
If the settlement negotiations falter and the glyphosate lawsuits' financial burden remains uncertain, the Wall Street Journal reports that Bayer may opt for bankruptcy for Monsanto. The company has enlisted a law firm and a consulting firm to review this strategy.
U.S. bankruptcy can shield companies from creditor claims and typically eliminates the owner's claims on the company. While controversial, several U.S. companies have resorted to this tactic for their subsidiaries in the past to shed damage claims.
If the plan proves successful, Bayer could say goodbye to the loss-making Monsanto chapter. The $63 billion Bayer spent on Monsanto in 2018 has evaporated, and the total loss is even greater. At the time of the acquisition in June 2018, the company was worth around $100 billion on the stock market. Today, only about $25 billion remains.
- Germany-based Bayer
- Monsanto
- Glyphosate
- Bankruptcy
Insights:
- Bayer confronts mounting financial and legal hurdles from thousands of Roundup lawsuits, which claim the herbicide causes cancer, specifically non-Hodgkin lymphoma.
- Bayer has already settled nearly 100,000 Roundup cases, at an estimated cost of $11 billion by early 2025. However, tens of thousands of cases remain pending, mainly in Missouri state court, where Bayer is pursuing new settlement negotiations.
- If the ongoing negotiations fail, Bayer may consider filing Monsanto for bankruptcy under U.S. Chapter 11 to limit its broader financial exposure. This move could potentially isolate glyphosate liability claims within Monsanto, protecting Bayer from direct creditor claims.
- The use of Chapter 11 bankruptcy in mass tort situations with inherited liabilities has precedents, albeit facing legal challenges and questions regarding fair compensation for plaintiffs.
- If the bankruptcy plan succeeds, it would represent a continuation of the trend for corporations to address overwhelming litigation risks using bankruptcy law.
[1] Retrieved from: ntv.de | [2] Retrieved from: wallstreetjournal.com | [3] Retrieved from: bloomberg.com | [4] Retrieved from: reuters.com
- In an attempt to mitigate potential financial losses from thousands of lawsuits linked to glyphosate, the herbicide manufactured by Bayer's subsidiary, Monsanto, Germany-based Bayer has considered filing for bankruptcy under U.S. Chapter 11.
- The employment policy of both Bayer and Monsanto, as well as the industry of finance, will be significantly affected by this potential bankruptcy, as it could impact the company's workforce and long-term profitability prospects.
