35 Percent Capital Increase at Bayer: Background and Goals
Bayer plans a capital increase of up to 35 percent to address financial challenges primarily arising from ongoing legal disputes in the U.S. related to the herbicide glyphosate. This capital increase could bring Bayer between seven and eight billion euros in the short term.
Background of the Legal Disputes
The legal disputes in the U.S. concern alleged health effects resulting from the use of glyphosate. Bayer has already paid around 10 billion euros to settle approximately 100,000 lawsuits and has created provisions of over 5.4 billion euros. Nevertheless, an additional 67,000 lawsuits are pending.
Aims of the Capital Increase
- Financial Security: The capital increase is intended to help Bayer manage the financial risks of ongoing and future legal disputes without increasing debt.
- Strategic Flexibility: With the fresh capital, Bayer could negotiate with plaintiffs to avoid costly loans and potentially finance an exit from the glyphosate business in the U.S.
Support from ISS
The influential shareholder advisory firm ISS supports the plans for the capital increase, as Bayer has provided a convincing rationale. This support is important because many U.S. investors, who often hold 20 to 25 percent of the share capital of DAX companies, adhere to ISS recommendations.
Exit from Glyphosate in the U.S.
Bayer is under pressure to consider an exit from the glyphosate business in the U.S. Such a step could affect supply chains and would be a strategic response to ongoing legal challenges.
Annual General Meeting and Decision
Bayer’s shareholders will vote on the proposed resolution for the capital increase on April 25. Approval would grant the management board the necessary flexibility to effectively address the legal disputes.