Bayer Weighs Pros & Cons of Breaking with Crop Science Divisions
Bayer considers separating from its consumer health or crop sciences divisions, according to new CEO Bill Anderson, who is looking to revive the German company’s share price. In a statement, Bayer said it is looking into separating either the non-prescription medicines business or the agriculture business from the rest of the group, but not at the same time. A sequential split into 3 companies or keeping all 3 divisions are both options, Anderson said.
In a media call, he explained that initial public share offerings or spin-offs without raising cash were among the possibilities but added that further details would be withheld until a capital markets day next March.
Bayer also unveiled plans to remove several layers of management to accelerate decision-making, resulting in a significant reduction in the workforce. Anderson said that 12 layers of management between him and customers are "simply too much.”
The company said that it expects a "soft growth outlook and continued challenges" to profitability next year. It also expressed confidence in its 2023 financial guidance but said a strong fourth quarter was needed.
Major drugmakers Johnson & Johnson, GSK and Pfizer split off consumer products units in the last 2 years. Last month, Sanofi mapped out a likely separate listing of its consumer healthcare business.
Bayer's agriculture, prescription drugs and consumer health care units accounted for about 50%, 38% and 12% of 2022 group sales, respectively.
Anderson is under pressure to boost shares that have underperformed those of peers, prompting investors to call for various forms of a break-up.
Analysts have said Bayer shares are trading at a massive discount to rivals in agriculture, pharmaceuticals and consumer health activities, partly weighed down by a preference among many financial investors for pure-play companies.
U.S. lawsuits over the alleged carcinogenic effect of its commonly used Roundup weedkiller are another burden on the stock, which before recently was down about 13% this year.
Bayer reported that third-quarter earnings before interest, tax, depreciation and amortization fell 31% to 1.685 billion euros, hit by lower earnings at its crop science division. That compared with analysts' average forecast of 1.725 billion euros.
It made a quarterly net loss of 4.57 billion euros against a profit of 546 million euros a year earlier, hit by impairment charges at the crop science unit due to higher interest rates.