Bayer Considers Spin-offs of Consumer Health and Crop Science Divisions Amid Slumping Stock Price

Intelligent Finance APP learned that, in order to revitalize its stock price, Germany's Bayer AG (BAYRY.US) is considering spinning off its consumer health and agriculture divisions. In a statement on Wednesday, Bayer said that the management is considering separating either the over-the-counter drug business or the agriculture business from the group, but not both at the same time. New CEO Bill Anderson stated that a sequential split into three companies is one option, while keeping the three divisions intact is also an option.

Anderson said that an initial public offering or a spin-off that does not raise cash are both options, but he added that further details will be announced at the Capital Markets Day in March next year.

"We are not confined to a single framework. We will pursue the best path to ensure the creation of maximum value," he added, noting that all members of Bayer AG's supervisory board support this review.

According to media reports in September, Bayer AG, the German pharmaceuticals, seeds, and crop chemicals manufacturer, also announced plans to streamline management levels to accelerate decision-making, which will result in a "significant reduction" in the number of employees.

Anderson said that the 12 layers of management between him and his clients were "simply too many."

Bayer stated that it expects "weak growth prospects and ongoing challenges" to impact its profitability next year. The company also expressed confidence in its 2023 financial guidance but noted the need for a strong fourth-quarter performance.

"Spinning off the consumer health business is the easiest way to create value. For Bayer, this means following industry trends," said Markus Manns, a fund manager at Union Investment.

In the past two years, major pharmaceutical companies Johnson & Johnson, GlaxoSmithKline, and Pfizer have all spun off their consumer goods divisions. Sanofi planned last month to list its consumer healthcare business separately.

Bayer's agriculture, prescription drugs, and consumer health segments accounted for approximately 50%, 38%, and 12% of the group's sales in 2022, respectively.

Anderson left Swiss drugmaker Roche in June this year to take the helm at Bayer. He is currently under pressure to boost the company's share price, as Bayer’s stock performance has lagged behind its peers, prompting investors to call for various forms of a breakup.

Analysts said that Bayer's stock price has a large discount compared to its competitors in the agriculture, pharmaceuticals, and consumer health sectors, partly because many financial investors prefer pure-play companies.

U.S. Litigation Over Carcinogenic Effects of Roundup Herbicide Another Negative Factor for Bayer's Stock Price; The Stock Has Fallen About 13% This Year.

Data shows that Bayer's EBITDA in the third quarter, before special items were excluded, fell by 31% to 1.685 billion euros, missing market expectations of 1.725 billion euros.

Bayer AG Reports Net Loss of €4.57 Billion in Q3 Due to Crop Science Division Impairment Charges Amid Rising Interest Rates, Compared to Net Profit of €546 Million in the Same Period Last Year