Bayer CEO rules out spinning off crop science business

Bayer’s CEO has ruled out the possibility of spinning off the company’s crop science division as a separate business.

In a news conference on Tuesday, Bill Anderson said the company has completed a thorough review of its current structure, which includes three divisions: pharmaceuticals, consumer health, and crop science.

He said the company will not be moving ahead with a break-up, despite pressure from investors who are frustrated with Bayer’s financial performance.

“In short, on the question of structure, our answer is ‘not now’ – and this shouldn’t be misunderstood as ‘never.’ Of course, we will keep an open mind,” said Anderson. “…we are convinced that this approach is what’s best for Bayer.”

He said the company is facing four major challenges: ongoing litigation against glyphosate in the U.S., the loss of exclusivities in pharmaceuticals, high debt levels, and internal bureaucracy.

“At first glance, there are valid arguments to make a change. A pure play structure has become the norm in our industries,” noted Anderson. “But you also always have to consider where you’re coming from. And today these four broken areas severely limit our access to structural options.”

A public offering for one of the divisions, such as crop science, would require an all-hands-on-deck effort for up to two years, delaying revenues and jeopardizing access to financing, he said.

They also looked at selling a division, but Anderson said that scenario would only be relevant for the consumer health business, which has a track record of positive financial results. Valuations, based on comparable sales, are also not strong at the moment, he noted.

Rather than making a structural change, Anderson said they’re focused on overhauling internal operations, which includes reducing the number of employee layers between the CEO and Bayer’s customers from as high as 12 to six or less. The company is also working toward having managers responsible for a minimum of 15 employees.

As for the glyphosate court cases which were inherited with the US$63 billion purchase of Monsanto in 2018, Anderson said while the company is seeing an average reduction in court-awarded amounts of around 90 per cent, Bayer is looking to resolve more cases outside the courts.

“It’s clear that a strategy of defence alone is not enough. We are looking at the litigation topic from every angle, inside and outside the courtroom,” he said. “It includes considering every possible means to bring closure to these lawsuits for the company and for our customers. Expect more action from Bayer in this space, but we will only comment on it when and where it is in the company’s best interests.”

Related: Bayer considering spinning off crop science business

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