Bayer shares hit after $2bn payout to couple in Roundup weedkiller case

Shares in Bayer dropped today even as analysts said a $2bn (£1.5bn) damages payment awarded to a California couple who claim the company’s Roundup weedkiller gave them cancer is likely to be reduced. 

Alva and Alberta Pilliod said that using the chemical had contributed to their contracting non-Hodgkin’s lymphoma.

Read more: Bayer considers appeal after losing weedkiller case in France

Each was granted $1bn in punitive damages and Alva was granted a further $18m in compensatory damages, while $37m more went to his wife Alberta.

The jury found that Roundup-maker Monsanto had acted negligently and not supplied adequate warnings of the cancer risk associated with the weedkiller.

Bayer shares are down around 2 per cent today to €55.29, after plummeting from around €96 in August.

However the final payment is likely to be considerably lower than $2bn. A US Supreme Court ruling limits the amount of punitive damages to nine times the compensatory. This would give the couple a likely payout of around $550m.

Liberum analyst Alistair Campbell said he expects the settlements to be lowered later this year. 

“Although the outcome looks ugly it doesn't really change my opinion that Bayer will overturn these awards on appeal and the final settlement will be significantly lower than these numbers suggest,” he said.

Bayer took what it hoped to be a calculated risk last year when it paid $63bn for Monsanto, taking on the liability for the lawsuits the company was facing.

Currently more than 13,400 cases are pending in the US alone, and the Pilliods become the third case in a row to claim victory against the German chemicals giant.

Two weeks ago Moody’s said that Bayer would be able to weather paying €5bn (£4.3bn) in settlements without taking a hit to its credit rating, but would struggle if payments totalled €20bn.

Shareholders hit out at management at the company’s annual meeting last month, voting to disapprove of the management’s actions around Monsanto.

Read more: Bayer shares tumble after weedkiller cancer verdict

“Bayer must be ruing the day they decided to buy Monsanto,” said CMC Markets analyst Michael Hewson.

He added: “Management’s refusal to try and settle the claims appears to be rattling investors, particularly since the refusal to engage is likely to result in further findings against the company, and as such further punitive damages. The optics of not sitting down and refusing to settle is only likely to result in further punitive rulings in the months ahead.”