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Bayer has dropped its shares by more than 5% on Friday as it seeks permission to increase capital by up to 35% to allow chemical conglomerates flexibility to handle ongoing litigation issues.
Shareholders learned about Bayer’s plans on Friday from Norbert Winkelhohan, chairman of the company’s oversight committee, in a letter.
Winkeljohan told investors that Bayer is seeking permission to serve as a “active financial risk management measure,” but the company rejected plans to use power.
The chairman reassured the shareholders that the funding would not be used to fund mergers or acquisitions, and that Bayer should “have in mind” the effects of dilution in issuing new capital to existing shareholders.
Products ranging from industrial chemicals to agricultural chemicals and pharmaceuticals face a variety of challenges, many of which are linked to legal challenges in the United States.
The biggest issue relates to the claim that glyphosate, a component of Roundup herbicides, made by a US-based Monsanto subsidiary, can cause cancer. Bayer and US federal regulators argue that there is no evidence that chemicals pose a proposed risk. However, a clause of 6 billion euros has been acquired to cover the potential costs of the litigation.
Winkeljohan’s letter states: . . The proposal approves the issuance of capital, but emphasizes that there are currently no concrete plans to utilize this approval. However, getting approval will eliminate the need to access your debt on adverse terms and increase your capital costs. ”
Upon approval, the Company may issue shares equivalent to 35% of the currently issued shares. Existing shareholders will be given priority to subscribe to new issues.
Bayer’s shares fell 5.2% at 23.56 euros in afternoon trading in Frankfurt.
In addition to facing pressure to resolve the issue of the lawsuit, Bayer had a net financial obligation of 32.6 billion euros at the end of December.
Winkeljohann reassured shareholders in his letter that the issuance would be “cautiously valued” to ensure that shareholders are made only in ways that would benefit the shareholders.
Bayer on Wednesday told shareholders it will face a third consecutive year of decline in profits in 2025.
The shareholders’ meeting is scheduled for April 25th.
“We appreciate your support in this resolution at the Annual Shareholder Meeting as this is an essential step in addressing two of our main priorities: litigation and derevalization,” Winkeljohan wrote.
