BAYRY Bayer Aktiengesellschaft (PK)

By Ruth Bender 

BONN, Germany -- Shareholders sent a strong rebuke to Bayer AG Chief Executive Werner Baumann at the company's general meeting in a sign of investors' growing impatience over legal woes in the U.S.

Some 55% of shareholders refused to endorse management's actions in the past year, indicating that investors lack confidence in how the company is being run.

During Friday's meeting, which lasted more than 12 hours, shareholders let loose on Mr. Baumann, warning that the company's acquisition of Monsanto Co. had put Bayer's future in jeopardy.

The German company's $63 billion purchase of Monsanto last year exposed it to thousands of U.S. lawsuits alleging that the agricultural giant's Roundup weedkiller causes cancer. Investors gathered at Bayer's annual general meeting said Mr. Baumann and his fellow directors had underestimated the legal liabilities when preparing the takeover.

"Management infected a healthy Bayer with the Monsanto virus, is now playing doctor but has no healing drug at hand," said Ingo Speich, head of corporate governance at Deka Investment, which holds roughly 1% of Bayer.

"One has to ask critically if the due diligence was faulty," said Janne Werning, an analyst for environmental, societal and governance risks at shareholder Union Investment.

Two early court defeats in the Roundup cases have sent Bayer's share price plummeting and unnerved investors who struggle to gauge the size of the potential liability.

Mr. Baumann and Chairman Werner Wenning vigorously defended the Monsanto purchase and the company's due diligence.

"The acquisition was and is the right step for Bayer," Mr. Baumann said in his 24-page address to shareholders.

Meeting attendees had to step over dead bees laid out by environmental activists who stage protests every year.

The shareholder rebuke highlights the depth of the crisis Bayer faces. Investor confidence in the chemicals and drugs giant was shaken after two U.S. juries since August deemed Roundup responsible for the plaintiffs' cancer. Bayer has lost roughly a third of its market capitalization.

Bayer faces lawsuits from some 13,400 plaintiffs and investors fear that the share price won't recover until the company scores some wins in court. Bayer has appealed in the first case and has said it would appeal the second. Five more trials are set to take place in 2019.

Mr. Baumann is particularly exposed to criticism as the main architect of the Monsanto deal, which he brokered and pushed through just days after becoming CEO in 2016. The deal took two years to get regulatory approval.

Even though Friday's vote carries no binding consequences under German law, a failure to obtain majority is a rare sight in the country and could further undermine management's standing in the investment community, analysts say. Last year, 97% backed management.

Christopher Koch, professor for corporate governance at the University of Mainz, said a 25% to 30% rejection could already give the supervisory board a reason to dismiss the CEO.

Mr. Wenning said he deeply regretted the outcome of the vote and said the board would promptly consult on the situation after the meeting. He had assured shareholders before the vote that the supervisory board stood firmly behind Mr. Baumann.

Few, though, expect Mr. Baumann to go. He and Mr. Wenning share a close bond, and the chairman himself was a major driver behind the Monsanto deal, according to people familiar with the company.

Some of the shareholders who said publicly they would vote against management even warned that a change in leadership would exacerbate Bayer's crisis rather than help resolve it.

Write to Ruth Bender at Ruth.Bender@wsj.com

(END) Dow Jones Newswires

April 26, 2019 17:38 ET (21:38 GMT)

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