By Geoffrey Smith
Investing.com -- German chemicals group Bayer AG (DE:BAYGN) has more cause to regret its $63 billion acquisition of Monsanto (NYSE:MON) this morning, after a U.S. jury found that its weedkiller Roundup was responsible for causing the cancer of plaintiff Edwin Hardeman. It’s the second verdict against the company and worse is to come, as the current trial in California will now move on to assessing corporate liability.
Bayer is still arguing that the verdict is scientifically unfounded, but its arguments are falling on deaf ears as the market has wiped another 11% off the stock’s value this morning. That move alone is around $7 billion, which is more than the $6 billion in direct costs that analysts see as likely from the Roundup cases, so there’s an open question as to whether analysts have been too cautious or the market is overreacting.
Back in 2015, when management was streamlining the sprawling conglomerate, its shares were worth over twice as much. But the Monsanto acquisition, intended to make it the global leader in agrichemicals, has not only brought a whole bunch of legacy legal liabilities, it has also created a lack of focus that has hit operations at the rest of the group. Those problems will remain even if the direct costs of Roundup can be reasonably contained.
Aside from Bayer, markets are flat to lower, content to await the result of today's Federal Reserve meeting and tomorrow's EU summit before making any more major moves. Germany's Dax is down 0.8%, while the FTSE 100 is unchanged and the benchmark Stoxx 600 is down 0.3% at 383.24.
U.K.-based satellite group Inmarsat (LON:ISA) is up 16.5% after receiving a bid from private equity interests, and Hermes (PA:HRMS), the French luxury group famous for its scarves and bags, is up 1.1% after posting another set of results that showed its business in China is still thriving, despite all the talk of an economic slowdown there.
On the downside, the big mining companies in the FTSE 100 are all lagging, due partly to fresh news of problems in U.S.-China trade talks and to a sharp drop in iron ore prices overnight. Brazilian giant Vale (NYSE:VALE), which has been in regulators’ crosshairs since a fatal dam collapse earlier in the year, announced on Tuesday it had received court permission reopen one of its largest mines, which would ease a global supply bottleneck. It had said earlier in the week that it would have to close another large mine temporarily due to regulatory issues.