Diversified German chemical and pharmaceutical company Bayer (OTC:BAYR.Y), has agreed to settle litigation over allegations that the weedkiller Roundup causes cancer in people exposed to it. The company, which inherited the product when it purchased chemical maker Monsanto in 2018, said resolution of the lawsuits will cost it between $10.1 billion and $10.9 billion, including addressing potential future litigation. 

Bayer says it will fund the settlement in part by selling its animal health business, and cover the rest through its free cash flow. The company reported free cash flow of approximately $4.7 billion in 2019. It said the resolution "will bring closure to approximately 75% of the current Roundup litigation involving approximately 125,000 filed and unfiled claims overall." This includes about 95% of cases currently set for trial. The settlement provides a framework for resolving the remaining cases. 

worker spraying bushes with weedkiller chemical

Image source: Getty Images.

The lawsuits revolved around the health hazards of the chemical glyphosate, which is a key ingredient in the product. Bayer said its decision to settle was based on a risk assessment versus potential costs and outcomes of continuing litigation, "and associated reputational and business impacts."

However, Bayer still asserted that "the extensive body of science indicates that Roundup does not cause cancer, and therefore, is not responsible for the illnesses alleged in this litigation." 

Scotts Miracle-Gro (NYSE:SMG) has also said it believes in the safety of the Roundup product if used properly. Scotts is the U.S. marketing agent for the well-known weedkiller, but its executives said in a 2018 earnings conference call that it is indemnified against any litigation related to glyphosate, and is not financially liable in any of the lawsuits.