Temasek Holdings Made Need More Aspirin on Disastrous Bayer Investment
Posted on 04/05/2019
German pharmaceutical giant Bayer AG has seen its stock halved since its highs in 2015, and relief is not on the horizon. Bayer’s fortunes took a turn for the worse after raising US$ 3.7 billion for its US$ 62.5 billion purchase of agricultural science group Monsanto. Bayer was able to do it by selling a 3.6% stake to one of Singapore’s sovereign wealth funds, Temasek Holdings. “Temasek takes equity positions in leading companies globally, and is a long-term investor,” Bayer CEO Werner Baumann beamed in a statement at the time. Baumann went on to say, “This investment affirms our business strategy, including the proposed acquisition of Monsanto, as well as Bayer’s strong growth prospects.” That has not proven to be the case, though, as Bayer and Temasek are likely regretting their cohabitation with public-pariah Monsanto. A U.S. federal jury has blamed Monsanto’s Roundup for a man named Edwin Hardeman’s cancer diagnosis. Hardeman testified that he had use the weed killer consistently and spilled the toxic liquid directly onto his skin. The ruling followed in the footsteps of a verdict last August, in which another California man, Dewayne Johnson, was found to have suffered at the hands of Monsanto. The company had “acted with malice or oppression” and owed Johnson US$ 289 million in damages, which were later reduced to US$ 78 million.
Hardeman’s cancer resulted in a jury verdict of US$ 80 million, to be paid by Monsanto. The jury further found Bayer liable, because Monsanto is its subsidiary, and Monsanto had not warned of the potential cancer risk involved in using their product. Bayer, as expected, denies that Roundup causes cancer. A statement suggested that “This verdict does not change the weight of over four decades of extensive science and the conclusions of regulators worldwide that support the safety of our glyphosate-based herbicides, and that they are not carcinogenic.” Bayer will have plenty of opportunities to make their case. The Hardeman trial is the second of more than 11,000 pending Roundup lawsuits. Legal fees alone could wipe out more of Bayer’s, and Temasek’s, shrinking value in the Monsanto investment. Their legal standing is also shaky, with a new husband and wife duo coming forward to claim that Monsanto is responsible for their non-Hodgkin lymphoma. The odds are 1 in 20,000 that both would suffer from the ailment, unless a poison they both came in contact with were responsible.
In the United States, glyphosate is by far the most widely used herbicide. Glyphosate is used on crops such as corn, cotton, and soybeans, as well as lawns and gardens. Monsanto has been fighting the allegations with its own “solid science.” While a dean for an English Department and scientist at a satellite campus of Washington State University made headlines by giving Monsanto’s products a public endorsement, a toxicologist at the University of California at Berkeley was “outraged” by the EPA’s failure to follow its own herbicide-assessment guidelines in evaluating the product. She resigned from an EPA glyphosate-review panel to conduct her own study of the chemical. That study found that glyphosate does, in fact, increase the risk of developing non-Hodgkin lymphoma. Monsanto’s legal battles are expected to begin in other states soon. Two new trials will take place in a St. Louis court later this year. Countless other cancer patients are likely reviewing their own exposure, and the potential for additional lawsuits is high. As a result, Bayer and Temasek’s losses are unlikely to be contained.
Norges Bank Investment Management (oversees Norway Government Pension Fund Global) is also a major sovereign wealth fund investor in Bayer. Tens of billions of euros in Bayer’s market capitalization have been erased. Sovereign wealth funds are perceived as long-term institutional investors; the question remains – will Bayer’s stock price recover?
