Contingent Liabilities and Other Financial Commitments

Contingent liabilities

The following warranty contracts, guarantees and other contingent liabilities existed at the end of the reporting period:

Contingent Liabilities

 

 

Dec. 31, 2015

 

Dec. 31, 2016

 

 

€ million

 

€ million

Warranties

 

99

 

100

Guarantees

 

123

 

264

Other contingent liabilities

 

562

 

444

Total

 

784

 

808

The guarantees mainly comprise a declaration issued by Bayer AG to the trustees of the U.K. pension plans guaranteeing the pension obligations of Bayer Public Limited Company and Bayer CropScience Limited. Under the declaration, Bayer AG – in addition to the two companies – undertakes to make further payments into the plans upon receipt of a payment request from the trustees. The net liability with respect to these defined benefit plans as of December 31, 2016, rose to €264 million (2015: €123 million) due to the sharp drop in interest rates.

Other financial commitments

The other financial commitments were as follows:

Other Financial Commitments

 

 

Dec. 31, 2015

 

Dec. 31, 2016

 

 

€ million

 

€ million

1

The contingent financial commitment of around US$56 billion was translated at the closing rate.

Operating leases

 

891

 

1,101

Orders already placed under purchase agreements

 

690

 

722

Capital contribution commitments

 

391

 

182

Definitive merger agreement with Monsanto Company, St. Louis, Missouri, U.S.A.1

 

 

53,000

Unpaid portion of the effective initial fund

 

1,213

 

1,213

Potential payment obligations under R&D collaboration agreements

 

2,887

 

2,444

Revenue-based milestone payment commitments

 

2,241

 

1,839

Total

 

8,313

 

60,501

On September 14, 2016, Bayer signed a definitive merger agreement with Monsanto Company, St. Louis, Missouri, United States, which provides for Bayer’s acquisition of all outstanding shares in Monsanto Company against a cash payment of US$128 per share. Bayer thus has a contingent financial commitment in the amount of approximately US$56 billion to acquire Monsanto’s entire outstanding capital stock. Further details of this planned acquisition are given in the Note “Scope of Consolidation Subsidiaries and Affiliates”.

The nondiscounted future minimum lease payments relating to operating leases totaled €1,101 million (2015: €891 million). The maturities of the respective payment obligations were as follows:

Operating Leases (Prior Year)

 

 

Dec. 31, 2015

Maturing in

 

€ million

2016

 

195

2017

 

155

2018

 

110

2019

 

94

2020

 

79

2021 or later

 

258

Total

 

891

Operating Leases

 

 

Dec. 31, 2016

Maturing in

 

€ million

2017

 

237

2018

 

192

2019

 

161

2020

 

138

2021

 

102

2022 or later

 

271

Total

 

1,101

Financial commitments resulting from orders already placed under purchase agreements related to planned or ongoing capital expenditure projects totaled €722 million (2015: €690 million).

The Bayer Group has entered into cooperation agreements with third parties under which it has agreed to fund various research and development projects or has assumed other payment obligations based on the achievement of certain milestones or other specific conditions. If all of these payments have to be made, their maturity distribution as of December 31, 2016, was expected to be as set forth in the following table. The amounts shown represent the maximum payments to be made, and it is unlikely that they will all fall due. Since the achievement of the conditions for payment is highly uncertain, both the amounts and the dates of the actual payments may vary considerably from those stated in the table.

Potential Payment Obligations Under R&D Collaboration Agreements (Prior Year)

 

 

Dec. 31, 2015

Maturing in

 

€ million

2016

 

262

2017

 

229

2018

 

96

2019

 

240

2020

 

78

2021 or later

 

1,982

Total

 

2,887

Potential Payment Obligations Under R&D Collaboration Agreements

 

 

Dec. 31, 2016

Maturing in

 

€ million

2017

 

233

2018

 

151

2019

 

333

2020

 

66

2021

 

28

2022 or later

 

1,633

Total

 

2,444

In addition to the above commitments, there were also revenue-based milestone payment commitments totaling €1,839 million (2015: €2,241 million), of which €1,834 million (2015: €2,237 million) was not expected to fall due until 2022 (2015: 2021) or later. These commitments are also highly uncertain.