Bayer announced on Tuesday that its Monsanto business unit has reached an agreement valued at up to $7.25 billion to resolve tens of thousands of current and future lawsuits alleging that its Roundup herbicide causes cancer. This move represents a significant step for the German company, which has been contending with legal risks associated with Roundup for years. Roundup was part of the company's $63 billion acquisition of agricultural chemical firm Monsanto in 2018. The company stated that the national settlement proposal, filed on Tuesday in a state court in St. Louis, Missouri, will establish a long-term claims program. This program will be funded by capped annual payments over a period of 21 years. Bayer is currently facing claims from approximately 65,000 plaintiffs in US state and federal courts regarding Roundup. The plaintiffs allege that they developed non-Hodgkin lymphoma and other forms of cancer after using the herbicide at home or at work. Following the announcement, Bayer's stock rose by as much as 7.7%, reaching its highest level since September 12, 2023. "This move by Bayer significantly reduces legal risk. Although the cost of the settlement is high, it covers future claims and is therefore welcome," said Ingo Speich of Deka Investment, a Bayer investor. Bayer indicated that it expects its provisions and litigation liabilities to increase from 7.8 billion euros ($9.24 billion) to 11.8 billion euros. The company anticipates paying approximately 5 billion euros in litigation-related costs in 2026 and now forecasts a negative free cash flow for the current year.

The proposed settlement is designed to avert future litigation. Roundup is one of the most widely used herbicides in the United States. Bayer maintains that decades of research show Roundup and its active ingredient, glyphosate, are safe for human use. The agreement covers the majority of lawsuits but requires judicial approval and a minimum number of plaintiffs to opt in. It does not require Bayer to admit liability or wrongdoing, and the company can withdraw if too many plaintiffs refuse to participate. The settlement also aims to prevent future lawsuits. It allows individuals who can prove they were diagnosed with non-Hodgkin lymphoma and had exposure to Roundup prior to this Tuesday to file claims for a portion of the compensation over the next 21 years. The agreement was negotiated with law firms including Motley Rice and Seeger Weiss, which will represent a nationwide class of plaintiffs if the court allows the deal to proceed. Bayer CEO Bill Anderson, in a call with investors and reporters, expressed confidence that the proposed class action settlement would resolve the vast majority of claims. Lawyers representing the plaintiffs in the negotiations stated that the agreement is the best possible solution. Payout amounts will be determined by a tiered system that considers factors such as the extent of exposure, age at diagnosis, and type of cancer. According to attorney Eric Holland, individuals could receive up to $198,000 or more. The company also mentioned it has reached separate, confidential settlement agreements with specific law firms to resolve other Roundup cases, but declined to name the firms or disclose the financial terms of those deals.

The proposed settlement comes after the U.S. Supreme Court agreed to hear an appeal. Tuesday's proposed settlement follows the U.S. Supreme Court's agreement to hear an appeal in a case that Bayer believes could substantially limit its liability in the litigation. Bayer stated that this case, for which the Supreme Court has scheduled oral arguments for late April, remains crucial for resolving the Roundup lawsuits. Bayer argues that consumers should not be allowed to sue under state law for failing to warn that Roundup might increase cancer risk because the U.S. Environmental Protection Agency has not found such a risk and does not require such a warning. The company contends that federal law prohibits it from adding any warnings to the product label beyond those approved by the EPA. Markus Manns, a portfolio manager at Bayer shareholder Union Investment, cautioned that Tuesday's proposal is "not yet the breakthrough many investors had hoped for." "The settlement buys Bayer time, but if it does not win at the Supreme Court, a new wave of lawsuits could hit the company within a few years," he said.

Bayer has previously paid $10 billion to resolve earlier lawsuits. As of 2020, Bayer had paid approximately $10 billion to settle the majority of pending Roundup lawsuits at that time, but had failed to reach an agreement covering future cases. The company's record in cases that have gone to trial has been mixed. It has won trials in a series of Roundup cases, but has also faced substantial jury verdicts in recent years, including a $2.1 billion judgment in a case in Georgia, USA, in March of this year. These verdicts have dampened investor confidence, shattered hopes that the worst of the Roundup litigation was over, and increased pressure on Bayer to seek a comprehensive resolution.