Bayer is considering separating its consumer health or crop science divisions, according to the company’s new CEO, Bill Anderson. The goal is to revive the company’s share price, which has been struggling. The management is exploring the possibility of separating either the non-prescription medicines business or the agriculture business from the rest of the group. Anderson also mentioned that a sequential split into three companies is an option, as is keeping all three divisions intact. Further details will be provided at a capital markets day in March next year.
In addition to the potential separation, Bayer also plans to remove several layers of management to streamline decision-making and reduce the workforce. This move confirms a previous RushHourDaily report from September. Anderson believes that the current 12 layers of management between him and customers are excessive.
Bayer’s shares initially rose in response to the news but later fell by 1%. Analysts are weighing the company’s cautious guidance on business in 2024 against the possibility of an organizational turnaround. Bayer expects challenges to profitability in the coming year but remains confident in its 2023 financial guidance, emphasizing the need for a strong fourth quarter.
The potential separation of Bayer’s consumer health division is seen as a way to generate value and follow an industry trend. Other major drugmakers, such as Johnson & Johnson, GSK, Pfizer, and Sanofi, have already split off their consumer products units. Bayer’s agriculture, prescription drugs, and consumer health care units accounted for different percentages of the company’s 2022 group sales.
Anderson, who took over as CEO in June, is under pressure to boost Bayer’s shares, which have underperformed compared to its peers. He has promised to thoroughly review the company and explore all options. His appointment was well-received by shareholders, but some investors are urging him to act quickly to address the share price slump.
Bayer’s shares have been trading at a significant discount compared to its competitors in agriculture, pharmaceuticals, and consumer health activities. This is partly due to a preference among financial investors for pure-play companies. The company is also facing lawsuits over the alleged carcinogenic effect of its Roundup weedkiller, which has further impacted its stock performance.
In the third quarter, Bayer reported a 31% decline in earnings before interest, tax, depreciation, and amortization (EBITDA), adjusted for one-off effects. The lower earnings were primarily driven by the crop science division. The company also recorded a net loss for the quarter due to impairment charges at the crop science unit.
Overall, Bayer is exploring various options to improve its financial performance and share price. The potential separation of divisions and the streamlining of management are key steps in this process. The company aims to create maximum value and address the challenges it faces in the coming years.
