61By the time Bayer convened its annual shareholder meeting
this April, the mood was explosive. Inside the World Conference
Center Bonn—a massive glass-and-steel complex that housed
the former West German parliament—scores of shareholders
vented their frustration for almost 12 hours. Many were furi-
ous they’d never been given a chance to vote on the Monsanto
deal. Some said the Roundup debacle had been entirely fore-
seeable, especially since the number of plaintiffs had swelled to
more than 5,000 by the time the merger closed. “The erstwhile
pharma giant has mutated into a dwarf,” one investor fumed.
Later that night, a visibly emotional Wenning read the
results of a shareholder confidence vote. Baumann had become
the first CEO of a major German company in decades to lose
majority support, though the vote was nonbinding. And yet he
remained calm, as he had been all day while repeatedly stating
that Bayer, with help from an outside firm, had performed due
diligence, examining all publicly available documents about
glyphosate from the world’s regulatory agencies, as well as
some internal documents from Monsanto, before concluding
that the Roundup litigation risk had been low.
Instead of conceding any personal blame, Baumann said
the plaintiffs’ attorneys had made “incredible” and “upsetting”
accusations about Monsanto, which had misled the juries and
were undermining society’s faith in facts. “Here at Bayer,” he
said, “we are committed to helping people regain the trust they
have lost in science and in the regulatory authorities.”
Two weeks later, Bayer lost its third Roundup trial, which
brought the $2 billion verdict. Meanwhile, off-putting news
about Monsanto continued to emerge. In May the French media
uncovered a 2016 Monsanto project to keep track of journalists,
politicians, and scientists, allegedly to suppress criticism of gly-
phosate. Bayer appointed a law firm to investigate the claims
and concluded that Monsanto’s actions weren’t illegal. In August
theGuardianreported that Monsanto had operated a so-called
fusion center to monitor and discredit activists and reporters.
A Bayer spokesman told theGuardianthat Monsanto’s activi-
ties “were intended to ensure there was a fair, accurate, and
science-based dialogue about the company and its products.”
In the midst of all the damning revelations, Elliott
Management Corp., a hedge fund led by Paul Singer, disclosed
a $1.3 billion stake in Bayer. Singer, one of the world’s most
adversarial activist investors, made his fortune investing in dis-
tressed countries, including Argentina and Peru, as well as ruth-
lessly bringing down CEOs and streamlining companies. (One
CEO told theNew Yorkerthat researching Elliott after you find
out it’s invested in your company is like “Googling this thing on
your arm and it says, ‘You’re going to die.’”) In June, Singer’s
firm released an ominous statement saying, “While resolving
the litigation challenge is clearly an immediate priority, Elliott
believes Bayer could do more to maximize long-term value for
all its stakeholders.” Concerns that an outsider would claw into
Bayer and break it apart had become a very real possibility.
If Bayer is split, analysts say the pharma division is likely too
small to thrive on its own and may become a takeover target
for the likes of Pfizer Inc. Meanwhile, Bayer might have trou-
ble justifying running the world’s biggest agriculture company
from Germany, where GMO crops are banned and politicians
recently agreed to try to phase out glyphosate by 2023. Instead,
the headquarters could move to St. Louis, where Monsanto
in recent years spent about $400 million to upgrade facilities.
Baumann’s best hope for salvaging his job and keeping Bayer
intact will require moving beyond the Roundup litigation. In
June the company brought on renowned tort lawyer John
Beisner. It was widely thought to be a sign that Bayer intended
to fight rather than settle. But a month later, Baumann con-
ceded the company is “constructively engaging in the mediation
process” and would consider a financially reasonable settle-
ment if it were to put a lid on the Roundup cases. Bayer and the
next round of plaintiffs recently agreed to postpone several tri-
als in St. Louis County until January, presumably to see whether
a settlement will be reached this fall. Investors are hoping for
a resolution soon. If Bayer can cut a deal for anything less than
$10 billion, it will be worth it, according to Markus Manns, a
fund manager for Union Investment, a top Bayer shareholder.
Whatever happens, Roundup is rapidly falling out of
favor. In the U.S., the big-box retailer Costco Wholesale Corp.
removed it from shelves. Politicians from Austria to India are
calling for glyphosate bans, while Belgium, Canada, and other
countries are restricting use. The EU may simply allow the her-
bicide’s authorization to expire in 2022.
Millions of farmers still rely on Roundup, however, and
argue that nonglyphosate products would potentially be worse
for the environment. When reporters recently toured Bayer’s
crop science division, employees backed Baumann, saying the
Roundup litigation isn’t only misplaced, it’s also a distraction
from the company’s mission to develop much-needed agri-
cultural technology to produce more food on less land. “The
challenge just keeps getting bigger and bigger and bigger,” said
Condon, the division chief.
Baumann remains as placid and soft-spoken as ever. In
early September he traveled to Frankfurt to attend meetings.
Seated in the courtyard of the five-star Villa Kennedy hotel, he
looked tan and relaxed. Eighty percent of his personal wealth
is invested in Bayer, but he said he wasn’t losing sleep over
the Roundup litigation. The world’s regulatory bodies, he said
again, have long deemed the herbicide safe.
Having absorbed Monsanto, Baumann continued, Bayer
possesses unrivaled technology and resources to sustainably
meet the growing challenges of the agricultural industry. In
other words, he doesn’t regret buying the hated U.S. company.
“Irrespective of what the legal opinions say, I would not sleep
well, and I certainly would not be sitting here representing the
company, if a major mistake had been made on my watch.” <BW>
�With Joel Rosenblatt and Naomi KresgeBayer’sshares havetumbled about 33 %,
leaving its market value at $ 68 billion,
barely more than it paid to buy Monsanto