In mergers there is a process in which a select committee to the President analysis multiple companies to see which company would be a great fit and enhance the value of the company if a merger happened. The process could go on for years, there are reasons why some companies will merge and others will not, reasons change. The process went on and the folks at Bayer watched Monsanto for a long time. There are a number of overlaps in the agricultural sector and Bayer decided it was time to act. In a $63 billion merger Monsanto and Bayer merged and all was good.
Then came a lawsuit, one of Monsanto’s products – a week killer besides killing weeds was determined by a court to cause cancer. Monsanto will be appeal. What should Bayer do? what should it shareholders do? In an article by Ludwig Burger of Reuters, the first year, Bayer circled the wagons and clenched their fists to fight back and shareholders voted against no confidence in the Board. A year makes a difference, no agreement has been reached but people are talking, the Board received a 92.6% vote in favor of ratifying the executive board’s business conduct in 2019.
Bayer’s earnings has risen, but similar to all global companies the economic downturn has meant a need to preserve cash flow, but last year earnings rose.
Linking to dividend paying stocks, one would think that a billion dollar merger every thing had been taken into consideration, every rock turned and every possibility considered, but a lawsuit was missed for the great good. The lawsuit changed the merger, but it still went ahead. Once things are in motion, it is hard to stop them. We often think large companies have people to ensure that if someone buys a used car, outside does it start and run questions are asked. It turns out sometimes the probing is done and sometimes it is not. The idea of buying dividend paying stocks is the probing can take extra time and that is a good thing. If the company is consistently making money waiting for you to do your homework to see the continuing good results is a good thing to have confidence in.
There are more questions than answers, till the next time – to raising questions.