The order underscores U.S. farmers’ needs to have access to the herbicide, Bayer said on Thursday, adding the move would not lead to shortages of glyphosate in other countries.

WHY IT MATTERS: Glyphosate-based herbicides like Roundup are key crop protection products for Canadian farmers, but they’ve been the object of lawsuits on both sides of the border.

Bayer said last August that it could be forced to stop U.S. production of the widely-used farming weedkiller unless regulatory changes are made to stave off litigation that has been weighing on the German company.

Bayer is the only company producing glyphosate in the United States but the farming sector there also imports large volumes of generic copies from China.

Bayer, which has been trying for years to fend off contested product liability claims that the weedkiller caused cancer, earlier this week reached an agreement to pay as much as US$7.25 billion to resolve tens of thousands of such lawsuits.

Separately, the German group has persuaded the U.S. Supreme Court to hear an appeal that would sharply limit Bayer’s liability in the lawsuits, which have been brought mainly by private gardening users.

The top court’s decision to rule on the matter came after the Trump administration supported Bayer’s view that federal glyphosate regulation, which is mainly in Bayer’s favour, should take precedence over state laws invoked by the plaintiffs.

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Bayer has paid about $10 billion to settle disputed claims that Roundup, based on the herbicide glyphosate, causes cancer. About 67,000 further cases are pending for which the group has set aside $5.9 billion in legal provisions.

Why it matters: Roundup and other glyphosate products are key weapons in Canadian farmers’ weed-killing arsenal.

The German company has said plaintiffs should not be able to take Bayer to court by invoking U.S. state rules given the federal U.S. Environmental Protection Agency has repeatedly labelled the product as safe to use, as have regulators in other parts of the world.

“Without regulatory clarity (Bayer) will need to exit the business. Bayer have been clear with legislators and farmer groups on this,” analysts at brokerage Jefferies said in a note on Thursday, citing guidance Bayer’s leadership provided in a meeting.

Bayer, which acquired Roundup under the $63 billion takeover of Monsanto in 2018, said: “We are exploring every possibility to end this litigation.” It declined to comment further.

Disclosing glyphosate sales numbers for the first time, Bayer on Wednesday said the product, one of the most widely used weedkillers in U.S. field farming, generated 2.6 billion euros ($2.8 billion) in revenue last year.

“Bayer could reach a point in the future where the company is forced to discontinue the sale of the product in the United States,” a person familiar with the matter told Reuters, requesting anonymity because of the sensitivity of the matter.

As it released fourth-quarter earnings on Wednesday, the company said it was working to “significantly contain” litigation by 2026.

It has repeatedly said it is working with farmers’ associations to lobby U.S. federal and state legislators. It is also preparing to again petition the Supreme Court for legal protection, following a failed attempt in 2022.

Bayer, however, has not previously threatened to withdraw the product from the U.S. market, although it replaced glyphosate in U.S. consumer products with different weedkilling substances.

One of the world’s largest seeds and pesticides makers, Bayer competes with Corteva, BASF and China’s Syngenta.

It is the only glyphosate producer in the United States, where the U.S. farming sector, which also imports cheaper generic glyphosate from China, relies on modified soy and corn that are resistant to its weedkilling effect.

The glyphosate litigation, which Bayer inherited from a Monsanto deal that was masterminded by Anderson’s predecessor, has weighed heavily on the stock, together with factors, including a drug development setback in 2023 and a weak agriculture markets.

Bayer said at the time of its results release on Wednesday it would internally separate the glyphosate business from the rest of the Crop Protection division.

When asked in an analyst call whether the glyphosate business could be sold, divisional head Rodrigo Santos said: “We’re going to continue to discuss in the future, evaluating all the alternatives that we have for the business. That’s always what we do”.

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Chief Executive Bill Anderson has started cutting jobs, speeding up decision-making and slashing red tape in a bid to turn around the embattled industrial group, while putting plans to break up its diversified businesses on hold.

Shares in Bayer were down 11.6 per cent to 21.57 euros (C$31.89) at 10:04 GMT, their lowest level in 20 years following its update.

“We’re in the midst of a big agriculture downturn. And that’s very frustrating for people … We understand the investor sentiment, but we remain very optimistic that we’ve got a strong future,” Anderson said in the statement.

He also pointed to strong launches for Bayer’s new drugs Nubeqa for prostate cancer and Kerendia for kidney disease.

However, Markus Manns, a portfolio manager at Bayer shareholder Union Investment in Germany, criticised the CEO for not having publishing medium-term financial targets, which need to be addressed to win back trust.

“Bayer’s transformation needs to be urgently accelerated and management needs to finally communicate a sustainable growth strategy with specific mid-term targets for sales, earnings and debt reduction,” said Manns.

Chief Financial Officer Wolfgang Nickl said in Bayer’s quarterly earnings statement it expected “a muted outlook on top and bottom line next year with likely declining earnings”.

Based on earnings before interest, tax, depreciation and amortisation (EBITDA), and adjusted for special items, the 2025 forecast would mean a third consecutive annual decline, after the group on Tuesday also lowered its projection for 2024.

Bayer said that the earnings measure, when adjusted for currency impacts, would likely be between 10.4 billion euros (C$ 15.4 billion) and 10.7 billion euros (C$15.8 billion), down from a previous 10.7-11.3 billion euro forecast and last year’s 11.7 billion (C$17.3 billion).

Its July-to-September EBITDA, adjusted for one-offs, fell almost 26 per cent to 1.25 billion euros (C$1.85 billion), missing the average analyst estimate of 1.31 billion euros posted on Bayer’s website, with Bayer citing weak Latin American agricultural markets.

Regulation

Bayer’s $63 billion (C$87.9 billion) purchase in 2018 of seeds and pesticides maker Monsanto under Anderson’s predecessor was a long-term bet on robust growth in farming supplies which has so far misfired.

Debt and costly U.S. product liability litigation over disputed claims that Monsanto weedkiller Roundup causes cancer are further burdens which Anderson is struggling to shake off.

Bayer shares have lost close to 80 per cent since the Monsanto deal was closed in 2018 and about 70 per cent since it was agreed in 2016.

U.S. agrichemicals competitor Corteva and the agriculture unit of Germany’s BASF have also been hit by lower prices as weak produce prices weighed on demand.

Bayer’s shares trade at 4.6 times forward earnings over the next 12 months, well below BASF at 12 and 18.8 for Corteva. The ratio is widely used to gauge the relative value of stocks.

Bayer said its business is set to suffer more because U.S. approval for new soy seeds to be used with weedkiller dicamba will not be in time for the 2025 sowing season and EU regulators will pull insecticide Movento from the market under the bloc’s environmental agenda known as the Green Deal.

In addition, cost-conscious U.S. farmers are turning to cheap generic copies of Bayer’s pesticides, it said.

Bayer said that special charges of 4.1 billion euros (C$6.06 billion), mainly from write-downs on intangible assets in its Crop Science division, resulted in a quarterly net loss of 4.18 billion euros (C$6.18 billion), compared with a 4.57 billion (C$6.76 billion) euro loss a year earlier.

It confirmed its previous currency-adjusted guidance for 2024 sales and earnings per share before certain items.

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Two other larger German mutual fund management houses, DWS and Union Investment, have said they would vote in favour of approving the management board’s actions while shareholder advisory firms Glass Lewis and Institutional Shareholder Services (ISS) have recommended such a vote.

Bayer CEO Bill Anderson will face questions at the AGM over his decision in March to suspend for up to three years any preparations to break apart the German maker of pharmaceuticals, crop protection products and consumer health remedies.

Anderson, who became CEO in June 2023, has had a tumultuous start with a continued wave of U.S. litigation about an alleged cancer-causing effect of weedkiller glyphosate and a major setback in drug development late last year.

“We don’t regard Mr. Anderson’s start as successful. We would have wished for more of a focus on aspects that are relevant for the share price,” Deka’s head of sustainability and corporate governance Ingo Speich said in a speech made available to Reuters ahead of the AGM.

The vote on ratifying the executive board’s business conduct, which prominently wraps up every German AGM, is largely symbolic because it has no bearing on management’s liability or tenure. But it is treated as a key gauge of investor sentiment.

Anderson said in a statement that he would seek to boost drug development, while also tackling litigation, debt and excessive corporate bureaucracy.

“The soul of this company is alive and well,” he said, adding that he would work hard to address shareholders’ frustration over the falling share price.

Harris Associates, another major Bayer shareholder, has told Reuters it strongly supports Anderson, including his decision to suspend work on breaking up the group.

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Despite recent improvements in the company’s agriculture business and drug development prospects, Bayer shares have been weighed down by litigation related to a product it acquired through its 2018 takeover of Monsanto. Shareholders have also cited a lack of market trust in its top management.

“When it comes to CEO succession we say: the sooner the better,” Markus Manns, a portfolio manager at Union Investment, one of Bayer’s 10 biggest shareholders, told Reuters.

The demand comes within days of another major German portfolio manager saying that supervisory board chairperson Norbert Winkeljohann must speed up the search for the successor to Baumann, who has led the company for nearly seven years.

Ingo Speich, head of sustainability and corporate governance at Deka, was quoted in Saturday’s Frankfurter Allgemeine Sonntagszeitung newspaper as saying Baumann had lost market credibility and so could no longer initiate strategic changes.

The mutual funds firm is among Bayer’s 20 largest shareholders.

“The Bayer stock is in a crisis of trust which the executive board is responsible for,” Speich told Reuters on Tuesday.

“Bayer has to take investor demands more seriously going forward. The Bayer stock is currently reacting more strongly to news from investors than to operating results. That’s a clear sign that something is wrong,” Speich added.

Union Investment’s Manns cautioned that the non-executive supervisory board may need time to find a qualified candidate.

“I’m sure the board is aware of the urgency of this personnel issue,” said Manns.

Baumann, who engineered the troubled Monsanto deal, was given a new contract in 2020 that runs until 2024 and said at the time he would leave the company when that term expires.

A spokesperson said Bayer was always open to a constructive dialogue with shareholders and declined to comment further.

Bayer is also facing demands from activist investor Bluebell Capital Partners to break up the company, including selling off its consumer health unit and later separating its pharmaceuticals and agricultural businesses.

Another activist investment fund, hedge fund veteran Jeffrey Ubben’s Inclusive Capital Partners, said this month it had also acquired a stake in Bayer, whose products include painkiller Aspirin, Yasmin contraceptives and stroke prevention pill Xarelto.

A stalwart of German industry with a nearly 160-year history, Bayer has lost over 40 per cent of its market value since the Monsanto deal, which was followed by a string of lawsuits over allegations that Monsanto’s Roundup herbicide causes cancer.

— Reporting for Reuters by Ludwig Burger and Patricia Weiss in Frankfurt.

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Bayer is now targeting earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for special items, of about 13 billion euros ($13.21 billion), based on June 30 foreign exchange rates, where it had previously predicted about 12 billion euros, it said in a statement.

Bayer, which has been hit by litigation costs over claims that a weedkiller it acquired under its Monsanto takeover causes cancer, said that second-quarter adjusted EBITDA jumped 30 percent to 3.35 billion euros, above an average analyst estimate of 3.28 billion euros posted on the company’s website.

Prices of agricultural commodities, such as corn and soy have surged globally after Russia’s invasion of Ukraine disrupted farming and grain transport there, prompting farmers elsewhere to use more chemicals and seeds to boost output.

The crop science division, which generated the bulk of Bayer’s earnings during the first half of the year, saw adjusted EBITDA surge by more than 70 percent to 1.75 billion euros in the second quarter, beating a market consensus of 1.56 billion euros.

By contrast, a litigation settlement and write-downs resulted in a net loss of almost 300 million euros for the quarter, where analysts had projected a net profit of about 1.5 billion, hit by special charges of 2.1 billion euros.

That included 694 million euros set aside for an expected settlement with the State of Oregon over waste water contaminated with PCB, a chemical Monsanto produced up until 1977.

Other charges included restructuring measures and write-downs on certain assets due to a strong rise in interest rates.

($1 = 0.9842 euros)

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The company said the write-downs, driven by weaker demand from farmers due to low biofuel prices, plus an increase of about US$750 million in the costs of settlement terms with U.S. plaintiffs over Roundup, resulted in a loss before interest and tax of 9.4 billion euros in the third quarter.

Bayer was caught up in litigation over Roundup, based on the herbicide glyphosate, as a result of its 2018 takeover of Monsanto for about US$63 billion, which made it the world’s largest supplier of seeds and pesticides.

“The impact of the (coronavirus) pandemic is placing additional strain on our Crop Science division. We are also facing negative currency effects,” chief financial officer Wolfgang Nickl said.

Nickl said a massive depreciation of the Brazilian real was weighing heavily on business in the world’s second-largest agricultural market.

Bayer said it was unable to say what part of the impairment was attributable to legacy Monsanto businesses, saying only that two-thirds of the writedowns were due to currency and interest rate effects.

Bayer on Sept. 30 had predicted impairment charges in the mid- to high-single-digit billion-euros range on agricultural assets and warned of a slight decline in 2021 core earnings per share.

Bayer struck an US$11 billion outline agreement with U.S. plaintiffs’ lawyers in June but a judge later took issue with a side arrangement on future cases that may yet be lodged, known as a class plan.

Addressing those concerns will prove about US$750 million more costly, Bayer said on Tuesday.

Bayer said it was “far enough along in the negotiations to know that the new plan will come in at approximately two billion U.S. dollars, an increase over the original cost of 1.25 billion U.S. dollars.”

Bayer’s shares were down 0.6 per cent at 0850 GMT, marking a loss of 22 per cent since Bayer first flagged writedowns and a likely decline in 2021 earnings on Sept. 30.

“This situation confirms our belief that Crop Science is a business with low visibility,” said Jean-Jacques Le Fur, an analyst at brokerage Bryan Garnier. He reiterated a “sell” recommendation, also citing uncertain Roundup litigation costs.

The charges more than offset combined gains booked in the quarter from the sale of its animal health business to Elanco and the divestment of a stake in industrial park operator Currenta of five billion euros.

That resulted in a net loss of 2.7 billion euros compared with an average analyst projection of one billion euros in net income.

Bayer said that 88,500 of the 125,000 glyphosate claims in the class settlement have been agreed in principle and that it was hoping to make considerable progress over the next few months.

— Reporting for Reuters by Ludwig Burger and Patricia Weiss.

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The charges stemmed mainly from agreements which attempted to wrap up legal disputes inherited with its US$63 billion takeover of Monsanto in 2018, including settlements on dicamba, another herbicide, and on waste water contaminated with PCBs.

But it also included reserves for birth-control device Essure as talks over potential settlements “have intensified which made good progress in recent weeks,” Bayer said, adding that it stood by the device’s safety and efficacy.

Litigations charges of 1.25 billion euros at the pharmaceuticals unit for the quarter were mainly for funds set aside for the Essure litigation.

As of July 24, 32,000 U.S. users of Essure had brought lawsuits against Bayer, alleging personal injuries, Bayer said in its quarterly report.

Bayer on Tuesday also said earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for special items, would be around 12.1 billion euros this year, down from a target of 12.3 billion to 12.6 billion euros issued in February.

A second-quarter gain in adjusted EBITDA of 5.6 per cent, to 2.88 billion euros, was slightly above analyst expectations.

— Reporting for Reuters by Ludwig Burger and Patricia Weiss.

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The German company said that lawyers representing those preparing a class action had withdrawn a request for court approval of the $1.25 billion future claims scheme, part of a broader $10.9 billion agreement to settle close to 100,000 U.S. lawsuits related to Roundup (all figures US$).

The move would give both sides more time to address questions raised by Federal District Court Judge Vince Chhabria of the Northern District of California, who presides over the federal Roundup litigation, Bayer said.

Chhabria had raised concerns over Bayer’s plan to create an independent panel of scientific experts to help assess whether glyphosate-based herbicides such as Roundup caused cancer.

“Bayer remains strongly committed to a resolution that simultaneously addresses both the current litigation on reasonable terms and a viable solution to manage and resolve potential future litigation,” the company statement said.

Bayer said the wider agreement to settle current claims at a cost of up to $9.6 billion was not affected by Wednesday’s decision, which only impacted the agreement on future claims.

It declined to comment on the impact on the timetable for the bulk of the settlement.

“The (withdrawal) decision means that Bayer is back to square one when it comes to managing future claims, which will be worked up and filed over the coming years,” said David Noll, a law professor at Rutgers University who closely follows the litigation.

Elizabeth Cabraser, a lawyer representing the lead plaintiffs in the negotiations, said attorneys remained strongly committed to a fair and just resolution for all cases not yet included in the wider settlement.

Bayer is seeking to end legal disputes it inherited with its $63 billion takeover of Monsanto in 2018.

The agreement announced last month would apply only to U.S.-based cases, Bayer said at the time, and the company is “not contemplating” a settlement of similar Canadian cases related to glyphosate.

Court snag

On Tuesday, Bayer shares had fallen more than six per cent after Chhabria said that the court was inclined to oppose the part of the proposed settlement that deals with future claims. The case was due to be considered again on July 24. The shares slipped 0.7 per cent on Wednesday.

The company on Wednesday declined to say whether it would continue pursuing the idea of an outside scientific panel and said it would make adjustments to its existing plan to address Chhabria’s questions.

The San Francisco-based federal judge, in a filing on Monday, had questioned the idea of delegating the decision from judges and juries to a panel of scientists.

Chhabria also questioned whether potential claimants would want to remain bound by a ruling reached by the proposed scientific panel if research is still ongoing.

Regulators including the U.S. Environmental Protection Agency and the European Chemicals Agency, have determined glyphosate to be non-carcinogenic, supporting Bayer’s claim that the active ingredient in its Roundup product is safe for agricultural use.

However, in 2015, the World Health Organization’s cancer research arm determined the herbicide to be a “probable carcinogen,” and since 2018, three consecutive U.S. juries, who listened to scientific evidence from both sides during trials, found that Roundup causes cancer.

— Reporting for Reuters by Patricia Weiss and Tina Bellon; additional reporting by Arno Schuetze in Frankfurt.

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After more than a year of talks, however, some details and the overall amount of the settlement have yet to be finalised, one of the sources said on condition of anonymity.

German business daily Handelsblatt earlier on Tuesday reported a deal was imminent, with Bayer pledging $8 billion to $10 billion to settle the claims, including a $2 billion buffer for future cases (all figures US$).

The drugs and pesticides group, which said in May that talks were progressing, is keen to draw a line under the legal dispute over Roundup and other glyphosate-based herbicides, which it inherited via its $63 billion takeover of Monsanto in 2018.

Its shares rose six per cent to 72.78 euros at 2 p.m. GMT. Still, they were more than 20 per cent below their value August 2018, when Bayer lost the first of three court cases with damages in the tens of millions being awarded to plaintiffs.

Bayer, which has repeatedly said the product is safe to use and has approval from market regulators, is appealing all three jury verdicts.

In April, Bayer’s management regained shareholder support for its handling of the litigation process.

A Bayer spokesman declined to comment. Perry Weitz of Weitz and Luxenberg, one of the leading plaintiffs’ firms involved in the Roundup litigation, also would not comment.

Court-appointed mediator Ken Feinberg, who started work little over a year ago, also declined comment.

The company’s supervisory board was due to discuss and vote on the settlement in the coming days, Handelsblatt cited company and negotiating partner sources as saying.

As of April, the company had been sued by 52,500 U.S. plaintiffs who blame Roundup and other glyphosate-based herbicides for their cancer, up from 48,600 in February.

— Reporting for Reuters by Tina Bellon and Patricia Weiss; writing by Ludwig Burger.

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