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, 2016

 

Dec. 31, 2017

 

 

€ million

 

€ million

Warranties

 

100

 

88

Guarantees

 

264

 

148

Other contingent liabilities

 

444

 

614

Total

 

808

 

850

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, 2017, declined to €148 million (2016: €264 million).

Other financial commitments

The other financial commitments were as follows:

Other Financial Commitments

 

 

Dec. 31, 2016

 

Dec. 31, 2017

 

 

€ million

 

€ million

1

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

Operating leases

 

1,101

 

801

Commitments under purchase agreements for property, plant and equipment

 

479

 

493

Contractual obligation to acquire intangible assets

 

243

 

83

Capital contribution commitments

 

182

 

149

Binding acquisition agreement with Monsanto Company, St. Louis, Missouri, U.S.A.1

 

53,000

 

47,000

Unpaid portion of the effective initial fund

 

1,213

 

1,005

Potential payment obligations under R&D collaboration agreements

 

2,444

 

2,349

Revenue-based milestone payment commitments

 

1,839

 

1,923

Total

 

60,501

 

53,803

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 Note “Scope of Consolidation; Subsidiaries and Affiliates”.

Financial commitments resulting from orders already placed under purchase agreements related to planned or ongoing capital expenditure projects totaled €493 million (2016: €479 million), while contractual obligations to acquire intangible assets totaled €83 million (2016: €243 million).

The nondiscounted future minimum lease payments relating to operating leases totaled €801 million (2016: €1,101 million). The decline is largely due to the deconsolidation of Covestro. The maturities of the respective payment obligations were as follows:

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

Operating Leases

 

 

Dec. 31, 2017

Maturing in

 

€ million

2018

 

166

2019

 

143

2020

 

124

2021

 

93

2022

 

73

2023 or later

 

202

Total

 

801

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, 2017, 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

 

 

Dec. 31, 2016

Maturing in

 

€ million

2017

 

233

2018

 

151

2019

 

333

2020

 

66

2021

 

28

2022 or later

 

1,633

Total

 

2,444

Potential Payment Obligations Under R&D Collaboration Agreements

 

 

Dec. 31, 2017

Maturing in

 

€ million

2018

 

157

2019

 

510

2020

 

143

2021

 

143

2022

 

54

2023 or later

 

1,342

Total

 

2,349

In addition to the above commitments, there were also revenue-based milestone payment commitments totaling €1,923 million (2016: €1,839 million), of which €1,764 million (2016: €1,834 million) was not expected to fall due until 2023 (2016: 2022) or later. These commitments are also highly uncertain.

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