By Ludwig Burger
FRANKFURT (Reuters) -Bayer is considering breaking apart from its consumer health or crop science divisions, it said on Wednesday, as new CEO Bill Anderson gave his initial thoughts on how to revive the diversified German company's battered share price.
Management is looking into separating either the non-prescription medicines business or the agriculture business from the rest of the group which includes pharmaceuticals, but not at the same time, Bayer (ETR:BAYGN) said in a statement.
A sequential split into three companies is also an option, as is keeping all three divisions, said Anderson.
Initial public share offerings or spin-offs without raising cash were among the options, he said in a media call, but added further details would be withheld until a capital markets day next March.
"We are not wedded to one structure. We will pursue the best course to ensure maximum value creation," the CEO said, adding that all members of Bayer’s supervisory board backed the review.
The German maker of medicines, seeds and crop chemicals also unveiled plans to remove several layers of management to accelerate decision-making, resulting in a "significant reduction" in the workforce, confirming a Reuters report from September.
Anderson said that 12 layers of management between him and customers were "simply too much".
Bayer shares were down 1% at 1110 GMT, after rising as much as 1.2% in early trade as analysts weighed up the company's cautious guidance on business in 2024 against the prospect of an organisational turnaround.
Bayer 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.
"A separation of Consumer Health would be the easiest way to generate value. For Bayer it would mean following an industry trend," said Markus Manns, a fund manager at Union Investment.
Major drugmakers Johnson & Johnson (NYSE:JNJ) and partners GSK and Pfizer (NYSE:PFE) split off consumer products units this year and last. Sanofi (EPA:SASY) last month 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, who joined from Swiss drugmaker Roche and took the helm in June, is under pressure to boost shares that have underperformed those of peers, prompting investors to call for various forms of a break-up.
He has previously pledged to leave "no stone unturned" in his review of the 160-year-old German group and inventor of aspirin.
His appointment was widely welcomed by shareholders after predecessor Werner Baumann drew criticism for not responding to market concerns. But some investors have already urged Anderson to act quicker to address the continued share price slump.
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 Wednesday was down about 13% this year.
Bayer reported third-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) and adjusted for one-off effects 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.