Leverkusen, Germany – In an effort to address financial challenges resulting from the acquisition of Monsanto Co., Bayer AG plans to significantly reduce its dividend payouts. The decision to slash the dividend by 95% reflects the company’s struggle to manage a substantial debt load and a flood of lawsuits stemming from the 2018 takeover of the U.S. seed and weed-killer maker.

The company, which has been dealing with thousands of lawsuits alleging that the herbicide Roundup caused cancer, also faces a debt of more than €38.7 billion. In an attempt to alleviate the financial strain, Bayer will only offer investors the legal minimum required under German law, reducing the dividend to 11 euro cents ($0.12) per share for 2023, down from €2.40 the previous year.

Bayer’s Chief Executive Officer, Bill Anderson, emphasized that the decision to slash the dividend was not made lightly. The company has already implemented operational changes to streamline decision-making, reduce management layers, and cut thousands of jobs. Additionally, Bayer is reviewing its conglomerate strategy, which includes divisions focused on crop science, pharmaceuticals, and consumer health products.

The substantial dividend cut is expected to save Bayer about €2.3 billion annually for the next three years. Meanwhile, the company has pledged to spend up to $16 billion to resolve Roundup litigation, as it still faces tens of thousands of claims related to the matter. Additionally, Bayer is dealing with costly litigation over other Monsanto products, including the herbicide dicamba and toxic PCBs.

Beyond legal challenges, Bayer also faces financial pressure from slumping agriculture commodity prices, which impact sales for its crop science division. Furthermore, the pharma division is grappling with patent expirations for its top-selling drugs and may struggle to achieve growth through the decade.

In response to the financial strain, Anderson emphasized the top priority of reducing debt and increasing flexibility for the company. The decision to slash the dividend follows the example of other firms, such as Thyssenkrupp AG, which suspended payments for four years in 2019 to stem cash outflows.

While the dividend cut was not entirely unexpected, the magnitude of the reduction is likely to further diminish investor sentiment. The move underscores Bayer’s challenging free cash flow position and the need for significant strategic actions to restore the company’s financial stability.