Bayer shares gain as it reportedly plans to settle Roundup lawsuits

Investing.com -- Bayer AG (ETR:BAYGN) is making a renewed effort to resolve the thousands of lawsuits alleging its Roundup weedkiller causes cancer, while simultaneously preparing for a possible bankruptcy filing for Monsanto (NYSE:MON), the U.S. agricultural unit it acquired in 2018, the Wall Street Journal reported. 

The company’s shares rose nearly 3% in European trading after the report. 

Citing people familiar with the matter, the report said Bayer (OTC:BAYRY) is pursuing settlement talks in Missouri state court—where many of the lawsuits are pending—but is also working with advisers from Latham & Watkins and AlixPartners to prepare a Chapter 11 filing should the talks fail.

A bankruptcy filing by Monsanto would temporarily halt ongoing litigation and create a court-managed process for addressing the glyphosate-related claims.

Roundup, which contains the chemical glyphosate, has faced legal scrutiny since Bayer purchased Monsanto for $63 billion. The acquisition has since saddled Bayer with tens of thousands of cancer-related lawsuits. The company continues to maintain that the product is safe, citing endorsements from regulatory agencies such as the Environmental Protection Agency.

Since the acquisition, Bayer has seen its share price fall roughly 75% and has already spent about $10 billion on legal settlements, part of the $16 billion set aside to handle the litigation. Around 67,000 cases remain unresolved. The company recently warned farmers and retailers it may halt production of Roundup if a resolution to the lawsuits cannot be reached.

To bolster its finances, Bayer approved a share dilution plan in April that would raise $9 billion, and has begun separating its glyphosate business internally. Rodrigo Santos, who leads Bayer’s agriculture division, told investors the company aims to resolve its legal overhang within 12 to 18 months, describing the strategy as a “massive plan that has different front lines.”

Bayer is considering a more traditional bankruptcy approach rather than the controversial “Texas Two-Step” strategy used by companies like Johnson & Johnson (NYSE:JNJ) and 3M, which faced mixed results in court. Under this method, Monsanto’s U.S. operations would directly enter Chapter 11, the WSJ report said. 

Roundup remains widely used by American farmers, with nearly 300 million pounds of glyphosate applied annually, according to government data. As part of its defense, Bayer has lobbied lawmakers in several states to pass liability protections, with laws enacted in Georgia and North Dakota.

Meanwhile, Bayer is seeking intervention from the U.S. Supreme Court. The justices previously declined to hear an earlier appeal but could decide as early as June whether to take up a new glyphosate-related case that might help shield the company from future lawsuits.