According to the ideas of an activist shareholder, the chemical and pharmaceutical group Bayer is to separate from two of its three divisions. The hedge fund Artisan Partners, which according to Refinitiv data has a 0.8 percent stake in Bayer, considers the pharmaceutical division and the business with non-prescription health products (OTC) to be too small. David Samra, co-founder and portfolio manager of Artisan International Value, told the news outlet Reuters, the investor wrote a letter to the “conglomerate” Bayer before the publication of the quarterly figures on August 8th. The company has “a lot of problems”, including excessive debt. Bayer declined to comment.
In the letter, Artisan “proposed to reduce the dividend to zero because they need the capital to operate efficiently and invest in their business,” Sanmra said. “And then, in their announcement, they expressly committed themselves to their dividend – that is the exact opposite of what they should do in their own long-term interest,” criticized the hedge fund manager. Since then they have been “in contact”. Samra said Artisan didn’t get into the letter exactly how Bayer should rebuild the company. However, Bayer only consists of one division that is large enough and has long-term advantages. He apparently means the agricultural business Crop Science. In contrast, the pharmaceutical and OTC divisions are too small, have low margins and would “probably be better off with someone else”. There are enough role models for such splits in the industry – from GlaxoSmithKline to Johnson & Johnson.
Samra is impressed by the new Bayer boss Bill Anderson: “We think the new boss is great and his goal of increasing efficiency, as he did at Roche, is very good.” Anderson, who started in early summer, made it clear when presenting the figures two weeks ago that he was open to changes: “Nothing is off the table,” he said. “We are open to everything and we leave no stone unturned and that is the attitude with which we approach our strategy and our structure.” The question is whether Bayer in its current structure can be “the best home” for all three divisions.
In view of the weak share price, Bayer has long been under pressure from activist investors, who are demanding at least a spin-off of the OTC business. The largest of these is Harris Associates, which owns 3 percent of the shares. Inclusive Capital and Bluebell have already spoken. The latter, along with Artisan, had already made headlines at French food giant Danone when they urged CEO Emnanuel Faber to resign.