Bayer calls off break-up to tackle challenges

Frankfurt — Bayer said on March 5 it will hold off on plans to break up the diversified group. The company will  focus instead on improving the operating performance, resolving litigation and paying off debt.

“Our answer is ‘not now’ – and this shouldn’t be misunderstood as ‘never’,” CEO Bill Anderson said in a statement.

The company said that for the next 24 to 36 months it would seek to strengthen the drug development pipeline, address litigation, reduce debt, and to further pursue job cuts and speed up decision making by managers.

The cutbacks will reduce annual costs by €2bn from 2026, it added.

Anderson, who was hired in 2023 to reverse the company’s fortunes, previously said he was examining options to separate, spin-off or sell businesses. Reuters reported in February that no such action was on the cards for now.

The CEO faces a deluge of problems, most of which stem from the 2018 takeover of Monsanto for $63bn.

These include US litigation alleging harm from weed-killer glyphosate, a development setback for its most promising experimental medicine, weak agriculture markets and investor pressure to spin-off or sell businesses.

The company guided that 2024 earnings before interest, taxes, depreciation and amortisation (Ebitda) would slip to between €10.7bn  and €11.3bn on a currency-adjusted basis, down from €11.7bn in 2023.

A consensus posted on the company’s website showed analysts on average were expecting this year’s earnings to be at the lower bound of the target range, while last year’s figure was better than expected.

The shares were little changed after the 8am GMT open.

The CEO added he was “considering every possible means to bring closure” to US lawsuits, claiming that glyphosate has caused cancer in plaintiffs. That litigation wave is a key factor behind the company’s loss of value by two thirds since the Monsanto takeover.

Bayer would vigorously defend itself but also look for solutions “outside the courtroom”. It said more action was to come but it did not specify.

About 54,000 cases remain outstanding, after 113,000 claims were settled or found not eligible, according to its annual report.

Bayer has also not been able to shake off personal injury or environmental damage claims linked to polychlorinated biphenyls, or PCBs, which are Monsanto-made chemicals no longer in use.

To shore up its finances, that German drugmaker has slashed dividends, keeping what analysts estimate would have been combined pay-outs of €6bn-€7bn over three years.

Bayer’s net debt at the end of 2023 was up 8.5% to €34.5bn.

That burden has led some analysts to conclude a capital increase may become necessary. The company said it would seek to reduce net debt by €1bn-€2bn in 2024.

Reuters