Bayer AG said it may separate its consumer-health or crop-science operations, distinctly opening the door to streamlining its business for the first time since the $63 billion takeover of Monsanto.
“We are redesigning Bayer to focus only on what’s essential for our mission, and getting rid of everything else,” Chief Executive Officer Bill Anderson said as the agriculture and pharma conglomerate reported disappointing third-quarter earnings. That will likely impact the workforce as well as the company’s structure, he said.
Anderson, who took over as CEO in June, is considering a possible breakup that could unlock value as well as meet the demands of activist investors. His predecessor refused such a move, even after the Monsanto deal turned sour.
Earnings plunged 31% to €1.69 billion ($1.80 billion) before interest, taxes, depreciation and amortization last quarter, falling short of estimates, hurt by falling prices for glyphosate, the active ingredient in its blockbuster weed killer Roundup. Bayer reiterated that sales and profit will likely fall this year and said it expects “a soft growth outlook and continued challenges” to profitability for next year.
The stock was little changed in early Frankfurt trading. It has shed 20% in the past 12 months.
“We’re not happy with this year’s performance,” Anderson said. “Nearly 50 billion euros in revenue but zero cash flow is simply not acceptable.”
Bayer will remove multiple layers of management and coordination by the end of next year and elaborate on its future plans at an investor day in March, Anderson said.
The Texas native joined as Bayer confronts a thicket of challenges on both the crop science and pharma fronts. His statements are the most tangible picture Bayer has ever offered about its openness for potentially breaking up the current business model.
Anderson considered and then ruled out a simultaneous three-way split, he said Wednesday.
Werner Baumann, his predecessor, survived repeated shareholder rebukes during his seven-year tenure as CEO before stepping down this year. A staunch defender of Bayer’s conglomerate approach, Baumann spearheaded the acquisition of crops giant Monsanto. The deal saddled Bayer with debt and massive legal headaches related to Roundup.
(Updates with context on breakup in third paragraph, earnings in fourth)
