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Werner Wenning, Chairman of the Supervisory Board of Bayer AG and Werner Baumann, right, Bayer AG CEO, prior to the annual shareholders meeting of Bayer AG on April 26, 2019 in Bonn, Germany. Maja Hitij/Staff/Getty Images News
Werner Wenning, Chairman of the Bayer AG Supervisory Board, and Werner Baumann, right, Bayer AG CEO, prior to the annual shareholders meeting on April 26, 2019 in Bonn, Germany.

Shareholders rebuke Bayer CEO Werner Baumann

But Bayer's board steadfast in support of Baumann, while focus shifts to U.S. courts.

by Tim Loh, Naomi Kresge and Eyk Henning

As Bayer AG management digs in against a growing shareholder rebellion over the acquisition of Monsanto, attention will shift from the German company’s headquarters back to U.S. courts.

That’s where the German pharma and chemicals giant faces 13,400 lawsuits claiming that Monsanto’s Roundup weedkiller causes cancer. Even as it fights the cases, the company’s shareholders handed Chief Executive Officer Werner Baumann an unprecedented rebuke last week.

Bayer rose 2.3% to 60.12 euros in early Frankfurt trading. Including the impact of Bayer’s dividend payment, which took effect Monday, the stock fell 2.2%. Here’s where things stand.

What happened?

At a fractious, 13-hour gathering in Bonn on Friday, more than 55% of shareholders voted against absolving Baumann and other managers of responsibility for their actions in the $63 billion takeover last year.

Bayer’s board circled the wagons afterward, saying it maintained full confidence in Baumann. Several top investors consider the move a sign that Bayer is unwilling to address shareholder concerns, according to people familiar with the situation.

Will Baumann have to go?

The vote was non-binding, but other German CEOs have lost their jobs even after securing more support than Baumann. Several large investors said, however, that they would prefer the chief to remain in place because a change to Bayer’s management board could further delay a resolution to the U.S. litigation and any strategic review.

What are shareholders seeking?

Investors want Bayer to consider an overhaul of the board, take a more forthcoming approach in dealing with the U.S. litigation and conduct a sweeping review -- including a potential breakup of the conglomerate into crop science and pharmaceutical companies, said the people familiar with the situation, who asked not to be identified because the deliberations are private. A Bayer representative declined to comment on investors’ call for changes.

What happens next?

Management’s fate may ultimately lie in the hands of U.S. courts, where Bayer has already lost two Roundup cases and lawsuits are proliferating through multiple channels. In one set of proceedings, a U.S. federal judge this month ordered Bayer to pursue mediation, asking the company to try to settle legal challenges that have wiped more than 35 billion euros ($39 billion) off the market value.

Separately, a state court in California is hearing a case brought by a couple in their 70s who both have cancer. The jury is expected to rule as soon as next month.

Bayer denies that Roundup causes cancer and the company has been holding out hope for a court win that would give Baumann some breathing space as the company hones its legal response to the swelling wave of litigation. A third loss, however, could force the company to accelerate talks on a global settlement, which analysts have said could top $5 billion.

--With assistance from Phil Serafino.

To contact the reporters on this story: Tim Loh in Munich at tloh16@bloomberg.net ;Naomi Kresge in Berlin at nkresge@bloomberg.net ;Eyk Henning in Frankfurt at ehenning1@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net Kenneth Wong

© 2019 Bloomberg L.P

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