Bayer Bold Move: German multinational Bayer is contemplating the possibility of breaking apart its business divisions, including consumer health and crop science, as part of a strategic move to boost its share price, according to CEO Bill Anderson.
The management is considering the separation of either the non-prescription medicines or the agriculture sector from the pharmaceuticals and other divisions. This sequential split into three companies is one option, but they are also open to maintaining all three divisions.
Bayer is exploring various options, including initial public offerings or spin-offs, but specific details will be revealed at a capital markets day in March. Anderson emphasised that the focus is on creating maximum value for shareholders.
Additionally, Bayer intends to streamline its decision-making processes by eliminating several layers of management, which will result in a significant reduction in the workforce.
The announcement triggered mixed reactions among analysts, with Bayer shares initially rising before settling down. The company provided a cautious outlook for 2024, acknowledging ongoing challenges to profitability.
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A separation of the Consumer Health division is seen as a straightforward way to generate value and follows an industry trend where major pharmaceutical companies have divested their consumer products units.
Bayer’s agriculture, prescription drugs, and consumer healthcare units accounted for approximately 50%, 38%, and 12% of 2022 group sales, respectively. The move to explore a potential split comes as Anderson faces pressure to address Bayer’s under-performing shares.
Despite headwinds, including U.S. lawsuits related to the Roundup weedkiller, the new CEO is determined to turn the company’s fortunes around. He has the support of the supervisory board in this endeavour.
Bayer reported a 31% decrease in third-quarter earnings before interest, tax, depreciation, and amortisation, partly due to lower earnings in its crop science division. The company posted a net loss for the quarter, impacted by impairment charges at the crop science unit.
Bill Anderson’s leadership and the strategic changes ahead will be closely watched as Bayer seeks to navigate its way back to stronger performance and share price growth.