There's a a plague on, so it's easy to miss the non-plague-related news, but boy, the story of how Bayer-Monsanto is imploding in an inferno of corruption, litigation and negligence is SOMETHING ELSE.
nakedcapitalism.com/2020/08/devast…
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nakedcapitalism.com/2020/08/devast…
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You'll recall that Bayer merged with Monsanto in 2018, paying $66b in an all-cash deal and erasing the Monsanto name (apparently, they judged Bayer's association with Auschwitz to be preferable to Monsanto's association with Roundup).
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In the short time since, the Bayer-Monsanto merger has become "One of the worst corporate deals of all time" (per the @WSJ). Now it is embroiled in litigation that has sucked in Deutsche Bank, UBS, Credit Suisse and Volkswagen.
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The lawsuit, Haussmann v Baumann, uses Germany's extraordinary corporate law to target the company's board members, financiers, and advisors.
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The lawsuit claims that the board acted negligently by going forward with the acquisition despite the massive liability stemming from pending judgments against Monsanto for covering up the cancer risk from its glyphosate ("Roundup") weed-killer.
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In the years since, the company has paid $13b in judgements over the product, with no end in sight - and it still sells and aggressively markets Roundup without any warnings, teeing up future litigation.
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The lawsuit claims that Bayer's top management sought the Monsanto merger because they feared that Bayer was a hostile acquisition target, and believed that after such an acquisition they would lose their massive paychecks.
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In order to streamline the acquisition, Bayer structured it as an all-cash deal that would not need shareholder approval, taking out high-interest bridge-loans from massive banks that stood to profit handsomely and so skimped on their own due diligence.
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Bayer, too, failed to conduct the customary due diligence one would expect prior to a deal of this magnitude - a fact that bolsters the plaintiffs' claims in their suit.
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The plaintiffs are Bayer shareholders, and under German law, they are entitled to sue Bayer's board, and need only prove "negligence" to hold those board members PERSONALLY LIABLE.
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What's more, German Directors and Officers insurance - which normally buffers corporate boards from this liability regime - does not apply here, because these policies have "insured vs insured" exclusions that kick in when the board is sued by its shareholders.
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Also named in the suit are the banks that made the loans, and the suit seeks to claw back millions in fees that the banks trousered in the deal.
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Meanwhile, Bayer is still being sued over glyphosate, and has more pending litigation over Dicamba, another carcinogenic product it sells like candy.
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As @nakedcapitalism's @yvesmith writes: "So pass the popcorn. If this case gets past the jousting over using New York courts to get at German companies, it will expose even more ugly, self-serving behavior."
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