© Reuters. The emblem of Bayer AG is pictured on the facade of the historic headquarters of the German pharmaceutical and chemical maker in Leverkusen, Germany, April 27, 2020. REUTERS/Wolfgang Rattay
By Richa Naidu and Ludwig Burger
LONDON (Reuters) -Bayer must make main adjustments, together with “de-merging” two of its three enterprise arms, investor Artisan Companions (NYSE:) informed Reuters on Friday, including to a refrain of demand for change from different buyers.
Activist Bluebell Capital Companions known as for a breakup earlier this yr. Different prime buyers, together with mutual funds group Deka, had railed towards the corporate’s earlier management. Some have stated a simple repair could be to separate the healthcare and agricultural companies.
Artisan’s name will add to the strain on Invoice Anderson, who was introduced in from Swiss rival Roche to tackle the highest job in June. Anderson has been tasked with reviving Bayer (OTC:)’s share value, which has underperformed rivals, weighed down by the lingering prices of U.S. weed killer litigation.
Artisan needs the drugs-to-pesticides firm to search out new homeowners for its over-the-counter and pharmaceutical items, it stated.
“Just lately we wrote a letter to the conglomerate Bayer — and it’s a conglomerate,” David Samra, founding portfolio supervisor of Artisan’s Worldwide Worth staff, stated in an interview.
Bayer has a “complete host of issues” together with “an excessive amount of debt,” Samra stated.
Anderson stated this month he was not ruling out any choices as a part of his evaluate of the diversified firm’s technique and construction, “leaving no stone unturned”.
He’ll present an preliminary replace within the coming months and detailed plans in early 2024, he added.
Earlier than taking up as CEO, Anderson stated he was holding an open thoughts on whether or not to interrupt up the corporate. However another buyers have opposed such a transfer.
Artisan is Bayer’s sixteenth greatest investor, in response to Refinitiv knowledge. It didn’t disclose the scale of its stake.
Artisan steered “that they minimize the dividend to zero as a result of they want the capital to successfully function and reinvest again of their enterprise,” Samra stated, including that the letter was despatched previous to Bayer’s earnings outcomes announcement on Aug. 8.
“Then of their earnings launch, the corporate particularly got here out and stated they’re dedicated to their dividend which is the precise reverse of what they need to be doing within the long-term finest curiosity of their enterprise.”
Bayer declined to remark.
Anderson has inherited a number of challenges from his predecessor Werner Baumann, together with U.S. lawsuits claiming Bayer’s weed-killer Roundup causes most cancers.
The corporate stated in an unscheduled assertion final month that it was projecting a steeper fall in earnings, zero free money circulate and asset write-downs this yr, in what some analysts steered was Anderson looking for to get dangerous information out shortly to permit for a contemporary begin.
Samra stated the chairman of Bayer’s supervisory board, Norbert Winkeljohann, has in a roundabout way written a letter again to Artisan, however stated Artisan had “been in touch” with the corporate.
Samra stated Artisan “has not steered particularly how (Bayer) ought to restructure their enterprise” within the letter.
He stated within the interview that solely Bayer’s Crop Science unit was “correctly scaled” with “long-term benefits”, whereas he known as its over-the-counter well being merchandise and prescription drugs items “sub-scale”, low-margin and “most likely extra priceless within the arms of any person else”.
The farming seed and pesticides division Crop Science, the second largest international provider within the business after China’s Syngenta, accounts for about half of Bayer’s gross sales.
Giant pharma gamers have spun off non-prescription drug companies over the past yr, with Johnson & Johnson (NYSE:) itemizing Kenvue, and GSK itemizing Haleon in 2022.