This is a sorted suit of an American family, represented by REBECCA R. HAUSSMANN, (trustee of Konstantin S. Haussmann Trust, derivatively on behalf of BAYER AG), who are also Bayer shareholders, whom are suing the company they invested in, on the grounds that Bayer Supervisors, Managers, and attorneys, as well as banking lenders, did not make proper, due diligence based decisions, in the all-cash acquisition (the “Acquisition”) of Monsanto Inc. (“Monsanto”) Monsanto at $66 billion USD.
Which also includes the February 2020 event of an attorney, Christian Strenger (Center for Corporate Governance – HHL Leipzig Graduate School of Management), delivering a pre-filing copy of the shareholder derivative complaint to ……. Bayer, the company against whom the complaint is about to be filed.
Those listed as defendants in this suit are as follows:
Defendants’ Addresses:
-
Werner Baumann
Chairman Board of Management Bayer AG
51368 Leverkusen
Germany
-
Werner Wenning
Chairman The Supervisory Board Bayer AG
51368 Leverkusen
Germany
-
Liam Condon
Bayer AG Crop Science Division
Alfred-Nobel-Straße 50
40789 Monheim am Rhein
Germany
-
Paul Achleitner
The Supervisory Board Bayer AG
51368 Leverkusen
Germany
-
Oliver Zühlke
The Supervisory Board Bayer AG
51368 Leverkusen
Germany -
Simone Bagel-Trah
The Supervisory Board Bayer AG
51368 Leverkusen
Germany -
Andre van Broich
The Supervisory Board Bayer AG
51368 Leverkusen
Germany -
Heike Hausfeld
The Supervisory Board Bayer AG
51368 Leverkusen
Germany -
Reiner Hoffmann
The Supervisory Board Bayer AG
51368 Leverkusen
Germany -
Frank Löllgen
The Supervisory Board Bayer AG
51368 Leverkusen
Germany -
Wolfgang Plischke
The Supervisory Board Bayer AG
51368 Leverkusen
Germany -
Petra Reinbold-Knape
The Supervisory Board Bayer AG
51368 Leverkusen
Germany -
Michael Schmidt-Kießling
The Supervisory Board Bayer AG
51368 Leverkusen
Germany -
Detlef Rennings
The Supervisory Board Bayer AG
51368 Leverkusen
Germany -
Thomas Fischer
The Supervisory Board Bayer AG
51368 Leverkusen
Germany -
Thomas Elsner Eitelstr
6540472 Düsseldorf
Rath, Germany -
Christian Strenger
Center for Corporate Governance
HHL Leipzig Graduate School of Management
Jahnallee 59
04109 Leipzig
Germany -
Sabine Schaab Düsselring
1340822 Mettmann
Germany -
Otmar D. WiestlerIm Weiher
13169121 Heidelberg, Handschuhsheim
Germany -
Norbert Winkeljohann
Schledehauser Weg 77
49086 Osnabrück
Osnabrück, Stadt Niedersachsen
Germany -
Clemens A.H. Börsig
The Supervisory Board Daimler AG
Mercedesstraße 120 Geb. 120, 4. OG, Zone A
D-70372 Stuttgart
Germany -
Petra Kronen
Supervisory Board Covestro AG
Kaiser-Wilhelm-Allee 60
51373 Leverkusen
Germany -
Heinz Georg Webers
Works Council Bayer AG
Ernst-Schering-Straße 14
59192 Bergkamen
Germany -
Norbert W. Bischofberger
983 Barroilhet Drive
Hillsborough, CA 94010 -
Ertharin Cousin
4950 South Chicago Beach Drive #18A
Chicago, IL 60615 -
Johanna Hanneke Faber
8394 West Purdue Avenue
Peoria, AZ 85345 -
Colleen A. Goggins
7 Constitution Hill East Apartment 7
Princeton, NJ 08540 -
Sue Hodel Rataj
3639 Frei Road
Sebastopol, CA 95472 -
Thomas Ebeling
Ocean Outdoor Limited
25 Kingly Street, London
United Kingdom, W1B 5QB -
Klaus Sturany
Sentiero Crocetta 5
6612 Ascona
Switzerland -
Bayer Corporation
Corporation Service Company
135 North Pennsylvania Street
Suite 1610
Indianapolis, IN 46204 -
BofA Securities, Inc.
C T Corporation System
28 Liberty Street
New York, NY 10005 -
Bank of America Corporation
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801 -
Credit Suisse Group AG
Paradeplatz 8, 8001
Zurich Switzerland -
Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004 -
Linklaters LLP
1345 Avenue of the Americas
New York, NY 10105 -
Bayer AG
Attention: General Counsel Bayer Corporation
100 Bayer Road
Pittsburgh, Pennsylvania 15205-9741
The suit alleges:
“2. Plaintiff Rebecca R. Haussmann, trustee of Konstantin S. Haussmann Trust (“Plaintiff”), derivatively on behalf of nominal defendant Bayer AG (“Bayer”), files this shareholder derivative complaint against Bayer’s Chair, certain present and former Bayer Supervisors (directors), two of its top Managers (officers), two banks (BofA Securities, Inc. (a subsidiary of Bank of America Corporation) and Credit Suisse Group AG) and two law firms (Sullivan & Cromwell LLP and Linklaters LLP) (collectively, “Defendants”). As an owner of Bayer common stock shares and/or American Depository Shares/Receipts (“ADRs”), Plaintiff brings this action derivatively on behalf of Bayer, seeking (i) compensatory damages for the harm caused Bayer in connection with Bayer’s June 2018 $126-per-share, $66 billion all-cash acquisition (the “Acquisition”) of Monsanto Inc. (“Monsanto”); (ii) the disgorgement of all compensation paid to the Bayer Managers and Supervisors who participated in bringing about the Acquisition and all fees/monies obtained in connection with the Acquisition by two banks and law firms that were retained to advise and protect Bayer in connection with the Acquisition; and (iii) punitive damages from the Banks and three top Bayer insiders. The action alleges Defendants’ breaches of their duty of prudence, duty of care, duty of candor and duty of loyalty to Bayer in connection with the Acquisition,as well as aiding and abetting one another while participating in a course of misconduct that induced, permitted and facilitated the Supervisors and Managers’ actions damaging Bayer in violation of German law.
3. Shortly after February 7, 2020, Bayer’s Supervisors, Managers and lawyers, by secret, improper and unethical corporate espionage, with the knowing assistance of Defendant (#30 in the list above) Christian Strenger, learned of Plaintiff Haussmann’s legal strategy and obtained a copy of the 130-plus-page, nearly-final draft of her complaint. Instead of taking proper action to return the confidential attorney work product, and refusing to accept and use the information Strenger was improperly offering, which they knew was secret, proprietary and protected, Bayer’s Supervisors, Managers and legal counsel accepted and utilized the work product. They used it to try to hurt Haussmann and her counsel, while furthering their ongoing scheme to cover up the Defendants’ wrongdoing and breaches of duties, and to avoid legal responsibility for the damages they have inflicted on Bayer. Bayer’s Supervisors and Managers knew that Plaintiff Haussmann’s derivative complaint would be the most detailed exposure of their misconduct to date, cause intensive media coverage in advance of Bayer’s April 2020 Annual Meeting, and force Defendant Werner Wenning to resign and the Supervisors to take action, as well as require them to defend the lawsuit seeking damages in the United States.
Fearing that the complaint would cause a firestorm of adverse publicity, the Supervisors and Managers —acting out of consciousness of their own guilt and liability—quickly arranged to have the Chair of the Supervisory Board (Defendant Wenning) “voluntarily resign.” They also agreed to give Defendant Strenger public credit for his long-ago defeated and forgotten request for a special audit, which they intend to be nothing more than a continuation of Defendants’ prior proclamations that they acted properly —a rehash of the past —with no obligation to investigate the culpability of the Supervisors and Managers or to evaluate whether or not to pursue them for the damages they caused Bayer.
As detailed herein, the proposed special audit is a fraud —not authorized under Section 142 of the German Stock Corporation Act and not to be conducted by authorized auditors. In short, it is an “audit by the audited”—neither authorized by law or permissible under the circumstances. The bogus audit is part of the ongoing cover-up and intended to create a legal barrier to this case to protect Defendants from their accountability for the damages sought by Plaintiff Haussmann in this derivative suit. In so doing, Bayer’s Supervisors, Managers and counsel involved, as well as Strenger, are acting to disadvantage and damage Bayer.“
You can read the full 168 page filing below, note that the document leaked to Bayer by Strenger was only 130 or so pages.
What this document seems to detail, is that Bayer Supervisors and Managers knew that Monsanto had several chemical lines that had caustic properties (cancer causing agents), and attorneys for Bank of America were aware of this, but perhaps allowed the purchase of Monsanto anyway. Because it was the last to be acquired by larger entities, Monsanto was a poor performing stock before the new Bayer CEO wanted to acquire Monsanto, and once he got into place, Bayer doubled down with the Monsanto acquisition based on the seed portion of Monsantos holdings in the buyout, as well as Monsanto patents. The all cash purchase was the largest in German history. The banks that loaned the money to Bayer for the asset purchase were supposed to act in the best interest of Bayer, but authorized a bad loan, of sorts.
Why, though? Perhaps, because the banks and attorneys would make more than any investor…. this is what qualified immunity looks like, when it does not matter the consequences of bad decisions or illegal actions, officers of the courts are usually protected from personal liability.
The suit goes on to state:
“I. INTRODUCTION AND OVERVIEW OF ALLEGATIONS
4. In May 2016 Bayer undertook to acquire Monsanto, a highly controversial, oft-criticized and much-hated U.S.-based corporation. Bayer’s Managers and Supervisors knew of Monsanto’s terrible reputation — as they planned from the outset to immediately discontinue the use of the Monsanto brand name, even though Monsanto had been in business for 140 years. Over past years Monsanto had been implicated in several controversies and scandals, including
- (i) PCB (polychlorinated biphenyl) contaminated products, with their resulting cancer causing Dioxins, later banned, and requiring Monsanto to pay hundreds of millions of dollars to settle health-related claims;
- (ii) DDT, the insecticide banned in 2001 by the Stockholm Convention and the U.S. Environmental Protection Agency due to DDT’s horrible environmental impact and its human-health impact — causing cancers in young girls and infertility in men; and
- (iii) the Agent Orange catastrophe, where Monsanto was forced to pay hundreds of millions of dollars in damages to
victims (including thousands of U.S. service personnel) for the adverse health impacts (including cancers) of that Monsanto product.5. Before the Acquisition, Monsanto was a notoriously aggressive seller of genetically modified seeds and a companion herbicide product (Roundup), which utilized Glyphosate, a highly toxic chemical long suspected of causing cancer and/or otherwise harming human health. In March of 2015, over one year prior to Bayer’s initial May 2016 offer to acquire Monsanto the International Agency for Research on Cancer (“IARC”), an arm of the World Health Organization (“WHO”) gathered together experts from all over the world in Switzerland to review 1,000 studies concerning the health impact of Glyphosate. The IARC, which “systematically assembles and evaluates all relevant evidence available in the public domain for independent scientific review,” concluded that Glyphosate was a “probable human carcinogen,” and that there was a “statistically significant association” between human cancers and exposure to Glyphosate, including non-Hodgkin’s lymphoma. In addition, this WHO review concluded that certain Glyphosate-based formulations
using surfactants (to increase spray reach and adherence), like Monsanto’s Roundup mixture, “were more toxic than Glyphosate alone.”6. Despite the above and other warnings, the Supervisors, Managers, Banks and Law Firms caused or permitted Bayer to acquire Monsanto for $128 per share/$66 billion in cash — the largest acquisition in German corporate history.
The Acquisition has been a disaster, one of the worst corporate acquisitions ever which has inflicted billions of dollars of damages on Bayer and caused its market capitalization to collapse by some $60 billion.7. In 2015–2016 the worldwide agri-business industry was consolidating as low commodity prices resulted in slowing orders and growth. Dow acquired DuPont; and Chem China acquired Synergy. These two multi-billion-dollar acquisitions put competitive pressure on Bayer’s smaller agri-business. The rapid industry consolidation left Bayer with “slim pickings” — Monsanto. Monsanto, the “black sheep” and “least desirable company” in the industry, with its tarnished reputation and dangerous Roundup product, was all that was left. According to Der Spiegel, “Monsanto and its herbicide (Roundup) have long been viewed with a significant degree of distaste.” And as a result of the industry slowdown, by 2016 Monsanto’s own business was suffering. In March 2016 Monsanto slashed its 2016 earnings outlook and announced large layoffs of 3,600 employees — 16% of its workforce.
8. While others in the industry had shunned Monsanto, Werner Baumann — the Chairman of Bayer’s Board of Management (i.e., Chief Executive Officer (“CEO”)), with the support of Werner Wenning, the Chairman of Bayer’s
Supervisory Board (Board of Directors) — had been eyeing Monsanto as an acquisition for some time. They both had wanted to pursue a Monsanto Acquisition, as that would make Bayer a much larger corporation and would, in turn, benefit both of them personally. Also they planned the Acquisition to be for cash, financed by some $45–50 billion in new debt — far more debt than Bayer had ever had. For them an all-cash, debt-financed acquisition of Monsanto would operate as a “poison pill” and prevent a takeover of Bayer by another larger company — an event they wanted to prevent because that would cost them their lucrative and powerful positions at Bayer.9. By 2015 Bayer had become a highly respected international pharmaceutical “life sciences” company with the highest valuation on the Frankfurt Stock Exchange. This performance was credited in large part to Marijn Dekkers — the highly successful and well-regarded Bayer CEO. But in January 2016 it was suddenly announced that CEO Dekkers would retire early to be succeeded by Werner Baumann, a longtime Bayer functionary who was in charge of Bayer’s “corporate strategy,” which included potential acquisitions. Due to Monsanto’s controversial reputation, including the PCB, DDT and Agent Orange fiascos and the growing cancer controversy concerning Roundup — Monsanto’s flagship herbicide product — Dekkers strongly opposed and prevented any attempt to acquire Monsanto. As long as Dekkers was Bayer’s CEO, no Monsanto acquisition was possible.
10. When the surprising leadership change was announced, Baumann assured Bayer’s shareholders he planned no radical or revolutionary changes to Bayer’s business: “there was no need for [any] fundamental change in strategy.”
But then just 10 days after he assumed the CEO reins on May 1, 2016, Baumann secretly went to Monsanto’s headquarters in St. Louis, Missouri to make an unsolicited $122-per-share cash acquisition offer. The size of the proposed acquisition was staggering — over $60-plus billion in cash — the largest acquisition in German corporate history. The initial offer was very generous — a 44% premium over market value — to be paid in cash, and it came with a $2 billion reverse breakup fee to Monsanto.11. When word of the secret offer leaked in late May 2016, Bayer shareholders and the financial media denounced the offer. The offer “sparked outrage” and was a “huge shock” to investors. One large shareholder said he “struggled to find investors who favor ‘the deal’” and said the bid for Monsanto will be “expensive, earnings dilutive and destroy value.” Because of the huge amount of debt to be incurred, Fitch & Moody’s stated they would downgrade Bayer’s credit rating by “multiple notches.” According to a professor at Warwick University Business School, Baumann and Wenning had “thrown caution to the wind out of being behind in the industry’s final stage of consolidation,” Bayer “may well regret this at leisure … it is probably a good bid to lose …. Bayer’s acquisition of‘Frankenstein’ Monsanto could be a horror story for … Bayer ….This looks like a lose-lose bid — Bayer has been forced into paying too much.” Nonetheless, Baumann and Wenning assured Bayer’s shareholders that the Monsanto Acquisition would create “shareholder value,” and that “due diligence” regarding Monsanto would be conducted.
12. Glyphosate, the active ingredient in Roundup, has been controversial for many years. Roundup’s health impact — from consuming products that were sprayed with it (i.e., consumers) or from exposure to it during agricultural or other spraying (i.e., farmers, landscapers and their workers) had been widely criticized for years. Monsanto never put a cancer warning on its Roundup products and never tested its unique Roundup formulation, which contained surfactants to enhance spray spread and adherence to determine if that specific formulation caused cancer.
13. After the WHO concluded in March 2015 that Glyphosate was “probably carcinogenic to humans” (especially to those exposed to spraying), the Environmental Protection Agency (“EPA”) of California — a huge agricultural state and market for Roundup — classified Glyphosate as “a known carcinogen” in March 2017.
Individuals alleging personal injury due to Roundup exposure now had a greatly enhanced ability to sue, as such findings provided support for the causation element necessary for the Roundup cancer suits to succeed.
The amount of Roundup sprayed on crops is almost incomprehensible in terms of its potential health and liability impact. Monsanto had been selling Roundup since 1976. In the United States, 100 million pounds of Roundup is sprayed on farms and lawns each year. Over two pounds of Roundup has been applied per year per acre on U.S. crops and over a pound per year on cropland elsewhere in the world. Worldwide, nearly 2 billion pounds of Roundup is sprayed on crops and lawns. Every year millions of farmers, landscape workers and their families are exposed to Roundup from spraying. Countless millions more have been exposed from consuming the sprayed products all over the world. Approximately 70,000 patients in the U.S. alone are diagnosed with non-Hodgkin Lymphoma each year.
14. Notwithstanding the shareholder objections and media criticism of the offer to acquire Monsanto, negotiations with Monsanto followed the initial May 2016 offer. In September 2016 a $128-per-share, $66 billion all-cash deal (including the $2 billion reverse breakup fee) was signed, subject to U.S. and European regulatory (antitrust) approval and due diligence of Monsanto by Bayer’s Supervisors, Managers, Bankers and Law Firms to protect Bayer. When the deal was signed in September 2016, Bayer’s shareholders were again assured by Baumann and Wenning that the Acquisition would close by year end 2017 at the latest, create “significant value” and “an enhanced agricultural offering” with the “potential for premium valuation” — in short “a compelling transaction for shareholders” that would “improve profitability and earnings growth.”
15. In reality, the Acquisition has been a disastrous failure. Bayer has been engulfed by a tsunami of over 45,000 Roundup cancer lawsuits and has suffered damages verdicts in the billions of dollars in the cases tried since the Acquisition closed. These verdicts caused Bayer’s market capitalization to collapse by over $60 billion, wiping out the entire “value” of the Monsanto Acquisition, damaging Bayer and its shareholders. The Acquisition is now ranked as one of the worst corporate acquisitions in history. Bayer faces the prospect of thousands of Roundup cancer suits and billions of dollars in fees, judgments and settlements — plus horrible publicity of the kind that ruined Monsanto’s corporate reputation — even if the cancer lawsuits can be “settled.”
Let us absorb what is being stated here, a Bayer investor, is suing the company managers, lawyers and bankers for NOT doing Due Diligence on the largest company acquisition in German history. Monsanto was so toxic, such a poor investment, that the company shareholders are not going to allow 4,500 libelous lawsuits against RoundUP, Agent Orange, and DDT now that it is owned by Bayer. Now that money is involved, or loss there of, humans are objecting to a bad investment. Not only that, these suits are nails in the coffin for civil suits against Monsanto, now owned by Bayer.
16. Bayer and Monsanto were direct competitors when it tried to acquire
Monsanto. Because of antitrust concerns, Bayer was forced to keep out of Monsanto’s business, including its legal affairs, due to a “Keep Separate” court ordered agreement imposed by the antitrust regulators that sharply restricted the access of the Supervisors, Managers, Banks and Law Firms to Monsanto’s business operations, nonpublic information (including the damning evidence lurking in Monsanto’s files) and legal defense of the Roundup cancer cases, until the regulators gave permission to “close” the Acquisition.17. The antitrust regulatory reviews in Europe and the United States proved to be much more difficult — and time-consuming — than Bayer’s Managers had anticipated. Negotiations dragged on with the regulators as they demanded far more in the way of divestitures than anticipated, billions in assets, including the divestiture of Bayer’s own successful non-Glyphosate-based Liberty herbicide product, which would leave Bayer only with the controversial “probable human carcinogen” Roundup herbicide, if the Acquisition went forward and closed.
18. As a result of the March 2015 WHO Study identifying Glyphosate as a “probable human carcinogen” and the March 2017 California EPA classification of Glyphosate as a “known carcinogen,” ever increasing numbers of personal-injury suits against Monsanto by users of Roundup were being filed in state and federal courts in the United States, alleging, inter alia, a failure to properly warn of the cancer risks of Roundup exposure.
19. It was no secret that once the WHO classified Glyphosate as a “probable human carcinogen” that the plaintiffs’ lawyers in the United States personal-injury-lawsuit machine were gearing up to go after Monsanto/Bayer. According to the Wall Street Journal:
In late 2016, a group of plaintiffs’ lawyers took the stage at the year’s largest gathering of their colleagues to talk up a promising new target. For 30 minutes, they laid out arguments linking the popular weedkiller Roundup to cancer. An arm of the World Health Organization had pegged Roundup’s main chemical ingredient as a probable carcinogen the year before, and it was quickly becoming a focus of the plaintiffs’ bar.
* * *
Three years later, more than 42,700 farmers, landscapers and home gardeners have sued Bayer AG, Roundup’s manufacturer, claiming the company knew the herbicide posed a cancer risk but failed to warn consumers. Bayer is contesting the lawsuits and argues that scientific research and regulatory reviews, including from the Environmental Protection Agency, proved Roundup’s safety. Behind the surge in lawsuits is a little-known, sophisticated legal ecosystem that includes marketing firms that find potential clients, financiers who bankroll law firms, doctors who review medical records, scientists who analyze medical literature and the lawyers who bring the cases to court. Individual plaintiffs can become commodities that are bought and sold by marketers, with prices based on demand. The more lawsuits that get filed, the more pressure companies face to settle.Building up thousands of cases against a single target gains momentum at conferences like the one in Las Vegas, called Mass Torts Made Perfect. The twice-yearly shindig is product-liability law’s big stage, drawing more than a thousand plaintiffs’ lawyers and vendors vying for their business over informational panels, cocktail hours and appearances by celebrities such as Peyton Manning and Nelly. The real headliners are the target products.… None have sparked the same level of interest as the weedkiller.
* * *
The herbicide first caught plaintiffs’ lawyers’ eyes in the spring of 2015, when the International Agency for Research on Cancer, a branch of the World Health Organization, deemed Roundup’s active ingredient, glyphosate, “probably carcinogenic” to humans.
* * *
Just days after the WHO agency published its findings, personal-injury law firm Weitz & Luxenberg PC registered the domain name www.RoundupInjuries.com. Within months, television advertisements hit the air seeking Roundup users who got cancer. Before year’s end, the first lawsuits were filed. Lawyers have clamored to sign up Roundup plaintiffs, making it the top product targeted by mass-tort lawyers and marketing companies in recent years, according to X Ante, which sells data to companies on mass-tort advertising. Between January and September, the weedkiller appeared in 654,280 broadcast and cable-TV advertisements costing an estimated $77.8 million, an X Ante analysis of Kantar Media CMAG and Media Monitors data shows. The number of advertisements is four times that of the next most-targeted product or drug for mass-tort lawsuits. Bayer blamed lawyer advertisements for more than doubling the number of plaintiffs from July to October.
* * *
“We operate just like any other industry,” said Mike Papantonio, a Florida plaintiffs’ lawyer who founded Mass Torts Made Perfect. Sara Randazzo & Jacob Bunge, Inside the Mass-Tort Machine That Powers Thousands of Roundup Lawsuits, THE WALL STREET JOURNAL, Nov. 25, 2019.
Again, these accusations in New York Federal Court filings are NOT going to go well for civil litigation for lawsuits against Monsanto. Imagine being on the jury for this case, and hearing hours of these allegations from the public, media, and the World Health Organization as well as California suits already tried, and asking the defendants, “were you aware of these public accusations against Monsanto, the business that you were hoping to acquire?”
I mean, who wants to be the business that acquires the company that poisoned GI’s with Agent Orange?
What if it is a worse case scenario, and Bayer was proud to purchase the company that harmed so many Americans?
Bayer was using Jewish captors as experiment groups in World War II, to the tune of simply ordering more when the first batch expired.
20. By September 2016 when the Acquisition agreement was signed (still subject to due diligence), 120 such suits had already been filed.
21. During 2016–2017 as the acquisition process stalled, there was unrest and increasing criticism from Bayer shareholders concerning the Acquisition. Baumann and Wenning repeatedly reassured Bayer’s shareholders that the Monsanto Acquisition would produce “significant value creation” and boost earnings significantly — both immediately and in the long term. To support — and boost the credibility of — these assurances, Baumann and Wenning stressed that they had a “proven track record of successful portfolio management” that had made Bayer an “experienced acquirer having successfully integrated various multibillion dollar transactions.” They specifically stressed the success of the most recent Bayer acquisition, Bayer’s $14 billion cash acquisition of Merck’s consumer-products business led by Baumann and Wenning in 2014. They told the critics of Bayer that this was an example of their proven skills as acquirers and assured them that the “Monsanto integration is expected to be no more complex than previous large integrations.” As to the regulators, Bayer’s top managers assured shareholders they were making “good progress” and that “we remain confident of closing the transaction before the end of 2017.”
22. However, the Defendants could not get the Acquisition closed by year end 2017. The antitrust regulators were insisting on unprecedented asset divestitures that would adversely impact the economics of the Acquisition for Bayer — including the sale of Bayer’s own successful non-glyphosate-based Liberty herbicide product. Nevertheless, when the closing was delayed until mid-2018 and Bayer’s stock again plunged, Baumann told shareholders “this does not affect our expectation of a successful conclusion to the regulatory review nor our conviction that this is the right step.” However, as the Acquisition closing was substantially delayed, the filing of Roundup cancer suits against Monsanto accelerated.
23. By mid-2018, as some of the early-filed Roundup cancer cases had progressed into discovery, incriminating evidence surfaced demonstrating Monsanto’s knowledge of the dangers of Roundup and intentional wrongdoing sufficient to support punitive damages. The so-called “Monsanto Papers” began to circulate on the Internet. And the personal-injury lawsuit industry in the United States geared up to focus on the Monsanto/Roundup cancer situation as a huge economic opportunity. The Roundup suits spread rapidly. By June 2018 when the regulators finally said the Acquisition could close, still subject to $9 billion in additional divestitures being completed, over 5,000 — perhaps as many as 11,000 — Roundup cancer suits had been filed — a 4,500% — 10,000% increase in suits while the Acquisition was pending!2 As was the case with manufacturers of asbestos products in the past, the use of Roundup has been so widespread, for so long, without any warning label that the number of potential plaintiffs was unlimited, as was Monsanto’s potential liability — not computable — not insurable — but clearly potentially very damaging, if not fatal, to Bayer if it assumed that liability by closing the Monsanto Acquisition.
2 Some sources suggest that 11,000 suits had been filed — many not served.
Recently, it was reported:
What’s so astonishing is that Roundup’s problems were hardly a secret. Some 11,000 cases were pending against Monsanto when Bayer bought the company, which was called by some “the most hated company in the world.” (That might have been a tip-off.)
* * *
Bottom line: A massive misunderstanding of the U.S. legal systems has cost shareholders tens of billions of dollars.
Andy Serwer & Max Zahn, The Downfall of 3 Iconic German Companies Is Nothing Short of Stunning, YAHOO! FINANCE, June 5, 2019.24. During 2017–2018 as the filing of new Roundup cancer suits rapidly escalated and the pending cases were being successfully prosecuted, the ability of the Supervisors, Managers, Banks and Law Firms to conduct due diligence into Monsanto and the ever-increasing risks the lawsuits and Glyphosate posed to Monsanto was severely restricted. As a result, Bayer could not conduct the kind of intrusive and thorough due diligence into Monsanto’s business and legal affairs called for under the circumstances. Instead, the Defendants were forced to rely almost exclusively on publicly available information in Monsanto’s U.S. Securities and Exchange Commission (“SEC”) filings and information obtained from Monsanto’s top executives. However, Monsanto’s SEC filings disclosed no material risks from Roundup and failed to quantify any potential financial impact. And Monsanto’s top executives — who had repeatedly defended Roundup and would, if the Acquisition closed, leave the scene after pocketing hundreds of millions in cash for themselves — had every incentive to minimize the Roundup risk in order to get Bayer to close the deal.
25. BofA Securities, Inc. (formerly known as “Bank of America Merrill Lynch”) and Credit Suisse Group AG were retained as advisors/bankers to protect Bayer by, inter alia, conducting independent, objective and thorough due diligence into Monsanto. However, their independence and objectivity was compromised from the outset because these two banks had been promised by Baumann and Wenning that they would be the lead bankers in arranging financing for the deal — over $50–60 billion in securities offerings and refundings that would net these banks hundreds of millions in fees if, but only if, the Acquisition closed. This “contingent” arrangement made the Banks economic “partners” in the closing of the deal — and “cash out” partners at that — because they — with the Monsanto executives — would pocket hundreds of millions when the deal closed, regardless of what happened with the Roundup cancer lawsuits or Bayer after that.
26. By June 2018 — now two years after Baumann first went to St. Louis to make the offer to acquire Monsanto — when the closing was finally permitted by the regulators not only had between 5,000–11,000 Roundup cases been filed, but plaintiffs in several of the first Roundup cancer cases had survived motions to dismiss, obtained damaging discovery and fended off challenges to expert testimony and pretrial motions. These cases were going to trial. The first bellwether case was scheduled for July 2018 in California, where the plaintiff could win compensatory and punitive damages by a 9–3 vote and that State’s EPA had classified Glyphosate was a “known carcinogen,” a finding upheld by California courts. However, because of “Keep Separate” antitrust restrictions, even if Bayer formally closed the Acquisition on June 8, 2018, it would still have to sell off over $9 billion in assets before the regulators would permit Bayer to have access to, and take operational control of, Monsanto — including Monsanto’s legal defense of the Roundup cancer cases — a process that would take until mid-late August 2018
to complete — after the bellwether case in California went to trial.