(News Bulletin 247) – Several activist funds including Bluebell and Inclusive Capital are putting pressure on the management of the German chemical giant to split the company, after the bitter failure of the takeover of Monsanto. The Bayer stock has lost more than half its value since 2018.

Storm at Bayer: the German chemical giant faces a vast offensive from activist funds, which demand a partition of the group to boost the value of the title, weighed down by the fiasco of the acquisition of Monsanto.

The atmosphere is explosive within the group, despite the presentation on Tuesday of solid annual results in 2022, with a net profit multiplied by four, thanks in particular to a rise in the price of herbicides.

The Bluebell and Inclusive Capital funds, which entered Bayer’s capital almost simultaneously at the start of the year, scolded the management to impose a division of the company and the departure of its managers.

Barely arrived, investors are already claiming a victory: the appointment – ​​extremely rare – in early February of a candidate from outside the company, Bill Anderson, to replace the former CEO, Werner Baumann, who landed prematurely. At Bayer, we refute any link between the arrival of investors and this announcement. But the pressure is mounting.

Split Bayer into at least two entities

The replacement of Mr. Baumann is only the beginning: the funds are asking to cut off more heads and rethink the strategy, to improve market confidence and the valuation of the title.

“The chairman of the supervisory board still has to make significant changes in the coming months to governance,” Nicolas Ceron, portfolio manager at Bluebell, told AFP.

These new investors are above all an explosive project: to split Bayer into at least two parts, agro-industrial activity and health. An idea particularly defended by Bluebell, even if Inclusive Capital believes that the debate “must be on the table”. Elliott Management, another activist fund that has been around since 2019, has also long been pushing for the split.

The Union Investment fund, which holds a little over 1% of the capital, supports the sale or stock market listing of the self-medication subsidiary, the smallest division of the group.

“The most important thing is to regain investor confidence,” Markus Manns, portfolio manager at Union Investment, told AFP.

All share the idea that the valuation of the group is worth much less than that of the sum of its entities, taken individually. A common difficulty for conglomerates holding activities that are too different and varied to be valued correctly.

“Our goal is to ensure that Bayer’s valuation reflects its potential,” said Mr. Ceron.

The Monsanto nightmare

Activist funds, whose capital participation is not precisely known, have arrived on favorable ground for a divorce between management and shareholders, since the takeover of Monsanto in 2018. This giant operation, at more than 63 billion euros , aimed at synergies in the agricultural and chemical fields.

But it turned into a nightmare. Bayer has faced a barrage of legal proceedings in the United States from former users of Roundup, a glyphosate-based herbicide marketed by Monsanto and considered “probable carcinogen” by the Circ, an arm of the World Organization health (WHO).

Bayer’s title has lost half its value since 2018. In Germany, investors are also claiming 2.2 billion euros in damages from the company. Werner Baumann even suffered in 2019 a rare disavowal from the general meeting of shareholders, which had rejected his strategy by 55.5%.

A split of the company could “limit the legal risks weighing on the valuation of the group to the agrochemical activity alone”, explains to AFP Andreas Lipkow, financial analyst for Comdirect.

Employee representatives, who sit on the company’s supervisory board, oppose the project. “We cannot base the transformation of an entire industry (…) on the activism of hedge funds” denounced Francesco Grioli, one of them. Bayer employs more than 100,000 people worldwide.

Many doubt that management will let it go. “I think they still have a sentimental attachment to the idea of ​​being the last big German industrial conglomerate,” said Sebastian Bray, financial analyst for Berenberg. Bayer, for its part, indicates that it is “open to a constructive exchange with all stakeholders”.

Still, the Bluebell fund is known for its ability to impose its views on the governance of a company. In France, in 2021 he won a showdown with the food giant Danone, which resulted in the ousting of the group’s boss, Emmanuel Faber.

(With AFP)