What did Werner Baumann write in his notebook after that day? The notebook is diary and homework book at the same time. On the front pages he notes important topics, on the back what he still has to do, Baumann told the SZ years ago. What he wrote in his notebook on February 28 will probably remain his secret. At the end of May, the 60-year-old is leaving after seven years as CEO. His successor, Bill Anderson, has been in place for a few weeks and comes from the Swiss pharmaceutical company Roche.
He is “very proud” of the last seven years and the last 35 years in which he “served” Bayer, and he still does it every day with great passion, says Baumann. Is this self-portrayal suitable as an entry for the narrow notebook? In any case, Baumann talks rather dispassionately about passion. While Dax companies such as BASF and Fresenius explained their figures for 2022 in analogue and virtual form, Baumann kept his distance. The Annual General Meeting at the end of April will also only take place virtually.
Bill Anderson is Baumann’s successor, he comes from the Swiss pharmaceutical company Roche.
(Photo: Georgios Kefalas/dpa)
As far as the figures are concerned, Baumann is satisfied. He sees Bayer in a solid position. Sales increased by a good 15 percent to 50.7 billion euros in 2022, and the operating result (EBIT) more than doubled to seven billion euros. Record figures in the agricultural business. Sales of herbicides containing the active ingredient glyphosate are booming. The shareholders should also benefit from the success, the dividend should rise by 40 cents to 2.40 euros per share. Baumann sees Bayer active in the “right” areas, health and nutrition, “essential basic human needs”. With such arguments he justified the takeover bid for the US group Monsanto in 2016 and defended it over the years.
Did someone really do everything right? Bayer paid 63 billion dollars for Monsanto, a company with a bad reputation – also because of its total herbicide glyphosate, which destroys all plants unless they are genetically modified in such a way that the poison does not bother them. In the US, tens of thousands of people attributed their cancer to the glyphosate-based herbicide Roundup. The share price has still not recovered from the wave of lawsuits that Bayer received with the takeover, no matter how good or bad the business was operationally.
The share price fell sharply on Tuesday. Bayer is worth around 55 billion euros on the stock exchange, less than the purchase price for Monsanto. Bayer is a share price hitter, the target of activist investors like Jeffrey Ubben and his fund Inclusive Capital, who are pushing for a breakup. On Monday, Bayer appointed Ubben to its sustainability council, which is an external body without rights that consults with board members twice a year. Will Ubben really pacify? Probably not.
Baumann’s balance sheet is “somewhere between tragic and catastrophic,” says Marc Tüngler, general manager of the German Protection Association for Securities Ownership (DSW): “Investors lost a lot of money during Baumann’s tenure and are still waiting for a recovery.” The burden of legal procedures and risks is so enormous that the fact that Bayer, together with Monsanto, has become the world number one in crop protection “appears irrelevant,” says Tüngler.
“A company in need of rehabilitation”
Markus Manns, fund manager at Union Investment, formulates more drastic sentences. Baumann is a “gambler who, with the risky Monsanto purchase, has led a healthy company to the brink of collapse.” The purchase of a seed business was strategically correct, “but you simply chose the wrong company”. Baumann is handing over a “company in need of rehabilitation, where the damage caused by the ‘Hurricane Glyphosate’ has been repaired as best as possible and the first repair work on the building fabric has begun”.
According to the annual report, Bayer assumes that out of a total of around 154,000 claims filed, around 109,000 have been compared or did not meet the comparison criteria. So far, Bayer has paid between nine and 9.5 billion dollars for settlements, explained CFO Wolfgang Nickl. The books still have $6.4 billion set aside for future settlements. And they hope in Leverkusen that that will be enough. The payments are not an admission of guilt. Bayer is convinced that glyphosate does not harm health when used properly. As evidence, the group refers to hundreds of studies.
Baumann complains that Bayer, but also the entire industry, is completely at the mercy of the industry of plaintiffs’ lawyers in the USA: There are no factual instances in the appeal systems either, but as a rule lay courts, which sometimes have to decide on very complex issues. “It’s quite a problem for all companies. It can happen to anyone.” Bayer had “absolutely misjudged the legal risks,” says fund manager Markus Manns: “The management should have withdrawn from the purchase when the wave of lawsuits started.”
That was never an option for Baumann. He has “served” his entire professional life. In early 2010 he became Chief Financial Officer. Numbers, facts, debit and credit are his guiding principles. Barely in office as CEO, he started buying Monsanto in May 2016. The US group already had a bad reputation back then. Critics called him “Evil Incorporated” or “Mutanto”. Already in 2005 Greenpeace described the Monsanto machinations. In 2015, Canadian musician Neil Young and US rock band release Promise of the Real an album entitled The Monsanto Years. Roundup, the herbicide with the active ingredient glyphosate, brings the poison wave, says one line of the song.
Bill Anderson will soon be responsible for the “repair work”. For fund manager Manns, the worst-case scenario would be to break it up into three parts — agricultural, pharmaceutical, and consumer health with products like aspirin. DSW man Tüngler also considers a break-up to be “the worst of all possible variants”, at least for the time being. It only serves the short-term oriented, activist investors.
In a study by Bank Barclays published at the end of January 2023, its specialists evaluated the individual parts and came to a value of almost 51 billion euros for the pharmaceutical business, a good 75 billion euros for Crop Science and almost 19 billion euros for Consumer Health. Makes a good 140 billion euros in total. After deducting a few factors such as debt, pension costs, charges from legal disputes and a conglomerate discount of 15 percent, the experts come to a total value of the individual parts of almost 93 billion euros.
Anderson needs time and needs a lot of individual steps, says Manns: “This is a marathon and not a sprint.” Anderson must restore investor confidence and review the corporate structure. “Satisfied shareholders are the best weapon to defend against a break-up,” said Manns. The spin-off of the Consumer Health division is an opportunity to “hopefully avoid the breakup”.
Baumann will train Anderson over the next few weeks. There have already been many discussions, says the outgoing CEO. With the “weak outlook” for 2023, he at least gives his successor a good start. It’s easier to beat cautious forecasts.