Monsanto Company

Monsanto was a Fortune 500 (ranked 199) agricultural products company based in St. Louis - just a few minutes from the Maryville University Campus. The company produced a variety of chemical products used by farmers and gardeners alike including Roundup herbicide. (Roundup is a weedkiller that contains glufosinate) They were also a major producer of genetically engineered seeds. In its early years, Monsanto was known for its production of food additives including saccharin, caffeine, vanillin as well aspirin. In 2018, Monsanto Company was acquired by Bayer. Bayer is a German pharmaceutical and life sciences company.

About the Sale of Monsanto

In May 2016, Bayer made an offer to buy Monsanto at $122 a share which would have amounted to $66 Billion ($66,000,000,000.) But there were hurdles to go through because of the size of the companies and market share they represented. Anti-trust concerns abounded. Bayer, based in Germany, needed the approval of the EU as well as the U.S. Department of Justice. Before being able to purchase Monsanto, Bayer was required to sell some of its soybean and cottonseed business. In addition, Bayer had to sell its glufosinate weedkiller division because of the market domination of Roundup.

After gaining the approval of both the EU and the U.S. Department of Justice, Bayer purchased Monsanto for $62.5 Billion ($62,500,000,000)

Roundup and the Lawsuits

Roundup herbicide was a critical source of revenue for Monsanto. While there were issues related to the accounting for sales of Roundup for which Monsanto was fined, our goal in this class is to look at the litigation related to the sale of Roundup. For years, farmers and other users of Roundup were concerned about the dangers of the effective product.

When it became clear that one of the ingredients in Roundup was linked to cancer, many cancer victims that had used Roundup sued Monsanto for damages. In several cases, jury verdicts awarded individuals millions of dollars to plaintiffs in relation to their use of Roundup. Some of these went to trial before Bayer purchased Monsanto. In May, 2019, a jury awarded a couple $2 billion in punitive damages and $55 million for pain, suffering and medical care due to exposure to glufosinate from Roundup. Read the article, "Jury awards couple $2 billion in Monsanto Roundup cancer lawsuit trial"(Links to an external site.)As a result, at least one class-action lawsuit is now being pursued against Bayer-Monsanto. Look at the2017 Annual Report(Links to an external site.)On pages 84-91 (96 of the pdf) of the 2017 Monsanto 10-K, they address the litigation in Note 24 COMMITMENTS AND CONTINGENCIES.

Class-Action Lawsuits

As individual lawsuits, each case would involve thousands of separate trials. Class action lawsuits combine the cases into one suit with one verdict, freeing up the justice system. But they can often involve small settlements to individuals with large sums going to the attorneys. As a result, Class Action Lawsuits get a "bad wrap." In most class action suits (not this one in particular) because the damages are very significant.

Financial Reports

Use the financial statements from Monsanto and Bayer to assist with answering the Case questions.

2009 Annual Report(Links to an external site.)

2010 Annual Report(Links to an external site.)

2010 10-K(Links to an external site.)

2011 Annual Report - Monsanto(Links to an external site.)

2011 10-k(Links to an external site.)

2012 Annual Report(Links to an external site.)

2012 10-k(Links to an external site.)

2013 Annual Report(Links to an external site.)

2013 10-k(Links to an external site.)

2014 Annual Report(Links to an external site.)

2014 10-k(Links to an external site.)

2015 Annual Report(Links to an external site.)

2016 Annual Report(Links to an external site.)

2017 Annual Report(Links to an external site.)

2018 February 2018 10Q(Links to an external site.)

Bayer 2018 Annual Report.pdf

Actions

2018 Bayer Annual Report(Links to an external site.)

SEC Ruling of Roundup(Links to an external site.)

Using the Financial Statements, Answer the following questions:

Question Group 1 |How Successful was Monsanto 2014-2017?Note:Answer this question by answering the questions below.

1. What was the Market Value of Monsanto each year?Note:Market Value is found by taking the (share price * the number of shares outstanding) - ...please show your work - access the stock price throughInvesting.com(Links to an external site.) (15 points)

Date	Share Price	Shares Outstanding	Market Value (show full dollar amount!)
August 29, 2014
August 31, 2015
August 31, 2016
August 31, 2017
June 1, 2018

1. What was the "Book Value" and EPS of Monsanto on each of these dates?Note:Book Value is derived from the Accounting Equation(Assets-Liabilities=Owners Equity)(15 points)

Date	Assets (show full dollar amount!)	Liabilities (show full dollar amount!)	Non-Controlling Interest (show full dollar amount!)	Net Worth (show full dollar amount!)
August 31, 2014
August 31, 2015
August 31, 2016
August 31, 2017
February 28, 2018

Question Group 2 |Why do you think Bayer paid so much for Monsanto? Follow up on the roundupNote:Answer this question by answering the questions below.

1. What did Monsanto have to say about the potential liability from the Roundup lawsuits outstanding?Note:To answer this questionRead Note 24of the2017 10K(Links to an external site.).Please explain in your own words(10 points)
2. After Monsanto was purchased by Bayer AG (a German company) the results seem more dismal. What happened to Bayer EPS from 2017 to 2018?(5 points)
3. What does Bayer have to say about the Roundup litigation (see pages100, 187, 230 and 250 of the2018 Bayer Annual Report(Links to an external site.).)Note: See the Annual Reports for Monsanto and Bayer(5 points)
4. People suing Bayer for damages related to Roundup will look at the value of Monsanto and Bayer. If you were the Forensic Accountant, how would you value Bayer as of February 3, 2020?Note:Explain your answer and show your calculations.(15 points)
5. Update the case - what happened in the summer of 2020 related to the case