Merck KGaA CFO jumps ship amid turnaround he helped engineer; shares slide

Matthias Zachert

Merck KGaA's Matthias Zachert's work there is done. The CFO, who helped engineer a cost-cutting drive, is leaving for the top job at his former employer. But while Zachert may be gearing up for his next professional challenge, Merck shareholders were not so enthused. News of his departure triggered a stock slide of more than 12%.

As Bloomberg reports, Merck shares dropped the most in more than four years Monday on word that Zachert would be jumping ship for the CEO spot at specialty chemical company Lanxess. And there's no word yet on who will fill the void.

Analysts are worried. Zachert was a key player in Merck's turnaround plan, which has already boosted earnings. "His unexpected departure and absence of immediate succession plan reduces visibility on the delivery of the strategy in whose design and implementation Zachert played a pivotal role," Morgan Stanley analysts wrote, cutting their recommendation on the stock in a note seen by the news service.

So far, that strategy--which included shuttering the pharma division's Geneva headquarters and laying off a combined 2,000 workers there and at Darmstadt HQ--has yielded a quicker-than-expected payoff. The company hiked its profit forecast for the year in November for just that reason, saying it would look for EBITDA of €3.25 billion, or up to $4.37 billion.

Those profits have come in spite of a sales slowdown, with revenue shrinking 3.1% last quarter and pharma revenue falling 3.4%. As a result, Bloomberg notes, Merck's shares have turned around, returning 30% last year after languishing among Europe's worst-performing stocks when Zachert joined the company in June 2011.

So, it's no wonder shareholders and analysts alike view Zachert's departure as "bad news for Merck," as Helvea analyst Odile Rundquist put it in an interview with Bloomberg. "It will be very difficult for his successor to further expand the margins once the current cost-cutting program is fully completed," she said.

- get more from Bloomberg

Special Reports: Top 10 Layoffs of 2012 - Merck KGaA | Top 10 Drugmakers in Emerging Markets - Merck KGaA

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