Bayer holds off on break-up to focus on management revamp for now -sources

By Ludwig Burger, Emma-Victoria Farr and Patricia Weiss

(Reuters) -Bayer AG will likely hold off on presenting break-up plans at an investor update scheduled for early March as CEO Bill Anderson prefers to focus on an internal reorganisation for now, two people familiar with the matter told Reuters on Thursday.

The likely delay in preparations to separate Bayer’s pharmaceuticals, consumer health and agriculture units comes even after several investors have for years urged the company to split up to shed a conglomerate discount.

Anderson, at the helm since June last year, said in November he is weighing options to break apart the diversified company in a staggered fashion but would not rule out keeping all businesses.

He also said at the time that he would seek to speed up decision-making by cutting a significant number of management positions, confirming an earlier Reuters report.

The sources said on Thursday that plans for any break-up could still be announced at a later stage, but that internal trimming would take precedence for now.

Bayer declined to comment on the deliberations, which were first reported by Bloomberg.

Late on Wednesday, the company said it had agreed with shop stewards on a significant reduction in managerial jobs and extended a pact that rules out compulsory redundancies in Germany until the end of 2026.

The diversified group is weighed down by the risk of further costly U.S. litigation over an alleged cancer-causing effect of its best-selling weedkiller Roundup, and by a weak agriculture business.

In a further blow, Bayer in November stopped a major trial testing a new anti-blood-clotting drug due to a lack of efficacy, throwing its most promising development project into doubt.

Bayer shares fell 2.5% by 1318 GMT. Portfolio manager Markus Manns at Union Investment said he would still want to see a critical review of the company structure at the March 5 capital markets day.

That should come on top of an update on how to reduce litigation risks, cut debt, boost the cash flow and drug development pipeline.

“This can’t happen all at once but the overall direction and urgency needs to be the right one,” Manns said.

Analysts at brokerage Stifel wrote in a note last week, however, that the current weakness in operating earnings and break-up costs would leave little room for investors to appreciate any separation scenarios.

“While we consider the CEO’s task to change the company’s culture as important, it is probably not a short-term driver for the stock,” the analysts said.

(Additional Reporting by Urvi Dugar in Bengaluru; Editing by Devika Syamnath, Miranda Murray and Susan Fenton)