Bayer investors granted class-action status in lawsuit over Monsanto deal

A federal judge has given the green light for a class-action lawsuit to proceed against Bayer AG brought by investors unhappy with the company’s $63 billion purchase of Monsanto Co. in 2018.

The suit, brought by three pension funds, alleges that Bayer AG misled investors over the risks of the acquisition and failed to properly perform due diligence before buying Monsanto, which at that time was the world’s largest seed company and the maker of the popular, but controversial, Roundup weedkiller.

Just weeks after closing the deal, Bayer shares plunged when Monsanto lost a bellwether trial brought by a California groundskeeper who alleged he developed non-Hodgkin lymphoma due to his exposure to Monsanto’s weed killer. The loss triggered a flood of additional litigation and ultimately led Bayer to agree in 2020 to pay roughly $11 billion to try to settle similar claims brought by more than 100,000 plaintiffs.

Bayer’s purchase of Monsanto was dubbed one of the “worst corporate deals” in recent history by the Wall Street Journal.

“These declines in the value of Bayer … caused Lead Plaintiffs and other Class members to suffer significant loss and damages,” wrote the plaintiffs’ law firm, Cohen Milstein, in a statement.

The lead plaintiffs in the action are the Sheet Metal Workers’ National Pension Fund and the International Brotherhood of Teamsters Local No. 710 Pension Fund, along with an additional plaintiff — the International Union of Operating Engineers Pension Fund of Eastern Pennsylvania and Delaware.

Multiple scientific studies have linked Roundup, made with the active ingredient glyphosate, to non-Hodgkin lymphoma (NHL), and in 2015 the World Health Organization’s International Agency for Research on Cancer classified glyphosate as a probable human carcinogen.

Though Bayer has settled many of the lawsuits brought by cancer victims against Monsanto, trials in the litigation continue. The most recent trial to take place concluded on Tuesday with a win for Bayer.

In a May 19 decision, a judge with the US District Court of Northern California rejected arguments by Bayer seeking to quash the class action.

A “red flag”

Plaintiffs allege that Bayer AG didn’t sufficiently warn them about risks of cancer litigation from users of Roundup before buying Monsanto. They claim that Bayer misled investors about its knowledge of the link between Roundup and non-Hodgkin lymphoma and hid its awareness that acquiring Monsanto opened Bayer up to significant liability until years later.

Monsanto had a history of “concealing the adverse health risks of its major products,” beyond Roundup, which was a “particularly significant ‘red flag’ to Bayer,” the lawsuit claims.

Given the active litigation involving cancer claims about Roundup before Bayer bought Monsanto and “Monsanto’s past corporate misconduct, it was essential that Bayer conduct meaningful due diligence as to the reputational and financial risk of the Roundup Litigation by examining Monsanto’s files to determine if Monsanto had — as it had with its other products — known of and concealed Roundup’s health and cancer risks,” the lawsuit states. “However, as investors learned only years later, this essential due diligence was never performed.”

Bayer said in a statement that it “respectfully disagrees with the Court’s decision to grant class certification and is considering its legal options.”

“Bayer and its leaders believe that the named plaintiffs have no viable claims and maintain that appropriate due diligence was conducted regarding the Monsanto acquisition process that ended with Bayer becoming sole owner of Monsanto on June 7, 2018. Reports by independent experts have confirmed that Bayer’s management conducted the acquisition in an appropriate manner and in line with their duties,” the company said.

The class action is one of multiple actions pursued by unhappy investors. Longtime Bayer CEO Werner Baumann, who was the architect of the Monsanto purchase, is being replaced with a new chief executive due to pressure from investors.

Bayer is also fighting a similar lawsuit brought by more than 300 investors in Germany, who are demanding 2.2 billion euros as reparations for the consequences of the Monsanto takeover.

Bayer has also been dealing with a push to break up the company from activist investor Bluebell Capital Partners.