Bayer said on Tuesday its Monsanto business unit had reached a deal worth up to $7.25 billion to resolve tens of thousands of current and future lawsuits claiming its Roundup herbicide causes cancer. The move marks a major step for the German company, which has been dealing with legal risks for years related to Roundup, which was part of its $63 billion acquisition of agrochemicals company Monsanto in 2018.

The German company said the nationwide settlement proposal, filed Tuesday in state court in St. Louis, Missouri, would establish a long-term claims plan that would be funded by capped annual payments for up to 21 years.

The company is facing claims against Roundup from about 65,000 plaintiffs in U.S. state and federal courts.

Plaintiffs say they developed non-Hodgkin lymphoma and other forms of cancer after using herbicides at home or at work.

After the news was announced, Bayer's stock price rose as much as 7.7%, reaching its highest level since September 12, 2023.

"This move by Bayer will significantly reduce legal risks. Although the cost of the settlement is high, it covers future claims and is therefore welcome," said Ingo Speich of Bayer investor Deka Investment.

Bayer said it expected its reserves and litigation liabilities to rise to 11.8 billion euros from 7.8 billion euros ($9.24 billion). The company expects to pay about 5 billion euros in litigation-related expenses in 2026 and now expects negative free cash flow this year.

Proposed settlement designed to avoid future litigation

Roundup is one of the most widely used herbicides in the United States. Bayer said decades of research have shown that Roundup and its active ingredient glyphosate are safe for human use.

The agreement covers most litigation but requires a judge's approval and a minimum number of plaintiffs to opt in. The agreement does not require Bayer to admit liability or wrongdoing, and it can withdraw if too many plaintiffs refuse to participate.

The agreement also aims to head off future lawsuits and allow those who can prove they were diagnosed with non-Hodgkin's lymphoma and were exposed to Roundup before Tuesday to file claims to receive a portion of their compensation over the next 21 years.

The agreement was negotiated with Motley Rice, Seeger Weiss and other law firms that would represent the nationwide plaintiff class if the court allows the deal to proceed.

Bayer CEO Bill Anderson said on a call with investors and reporters that he believed the proposed class-action settlement would resolve the vast majority of claims.

Lawyers negotiating on behalf of the plaintiffs said the agreement was the best solution. Benefit amounts will be determined by a tiered system that takes into account the level of exposure, age at diagnosis and type of cancer. According to attorney Eric Holland, individuals can receive up to $198,000 or more.

The company said it has separately entered into confidential settlements with specific law firms to resolve other Roundup cases, but it would not name those law firms or specify the amounts of those deals.

The Supreme Court will hear the appeal

Tuesday's proposed settlement comes after the U.S. Supreme Court agreed to hear an appeal in a case that Bayer argued would significantly limit its liability in the lawsuit.

Bayer said oral arguments in the Supreme Court case, scheduled for late April, remain critical to resolving the Roundup lawsuit.

Bayer argued that consumers should not sue Bayer under state law for failing to warn that Roundup increased the risk of cancer because the U.S. Environmental Protection Agency did not detect the risk and did not require such a warning. Bayer argued that federal law does not allow it to add any warnings on its products beyond EPA-approved labeling.

Markus Manns, portfolio manager at Bayer shareholder Union Investment, cautioned that Tuesday's proposal was "not yet the breakthrough that many investors were hoping for."

He said: “The settlement buys Bayer time, but if it fails to prevail in the Supreme Court, a new wave of litigation may engulf Bayer in a few years.

Bayer pays $10 billion to settle previous lawsuits

So far in 2020, Bayer has paid about $10 billion to resolve most of Roundup's outstanding litigation but has been unable to reach settlements on future cases.

The company has a mixed record in cases that have gone to trial. It has won a series of roundup trials but has also suffered huge jury awards in the past few years, including a $2.1 billion verdict in a case in Georgia in March.

The verdicts have both dampened investor confidence and the company's hopes that the worst of the "Roundup" litigation was over, while also putting pressure on Bayer to seek a comprehensive settlement of the litigation.