Bayer chairman under fire for lack of spinoff activity amid renewed investor activism

The push for a business separation at Bayer just got more personal.

Joining the chorus calling for a more focused Bayer, Union Investment portfolio manager Markus Manns criticized Bayer Chairman Norbert Winkeljohann for not initiating enough dialogue with investors.

“It would definitely have been a matter for the supervisory board to help initiate a spin-off of consumer health,” Manns told (German) WirtschaftsWoche.

Union Investment, with a reported 1.4% stake in Bayer, is among multiple shareholder groups agitating for change at the German conglomerate. Earlier this month, Bluebell Capital Partners was said to have built a stake in Bayer in a bid to force a sale of the group’s consumer health unit and, at a later time, a break-up between its pharmaceuticals and agriculture businesses. The activist investor was looking to replace Winkeljohann and CEO Werner Baumann, Reuters reported, citing a person familiar with the matter.

For his part, Manns already went after Baumann, having reportedly said it’s the CEO’s responsibility to devise the best company structure.

“It's too early for a break-up but the separation of consumer health would be an obvious way to create additional value,” Manns said a few days ago, according to Reuters.

Baumann has been under pressure to split up Bayer for quite some time, with the calls starting soon after Bayer’s $63 billion merger with Monsanto in mid-2018. Lawsuits claiming that Monsanto’s Roundup weedkiller causes cancer have snowballed and significantly derailed the company’s stock performance.

The discontent culminated in a rare no-confidence vote in Bayer management team in 2019 for its actions in 2018. Back then, Bernstein analysts called on Baumann to improve communications with investors and work to address the pharma patent cliff. They also recommended that Bayer should split up because of a lack of overlap between pharmaceuticals and crop sciences.

But Baumann stayed the course, having maintained that all three departments at Bayer share one scientific theme. The chief executive survived that round of pressure and regained investor backing the next year.

But several pharma companies have distanced themselves from consumer health in recent years. GSK combined its consumer health business with Pfizer’s and last year spun off the joint venture into Haleon. Johnson & Johnson is moving ahead with its planned spin-off of its consumer health business, now called Kenvue. Even mid-sized Ipsen peeled off its consumer health portfolio last year.

In publicly lodging his complaint with Bayer’s Winkeljohann, Union Investment’s Manns noted that board chairs at Novartis and GSK are much more committed to creating value for shareholders, likely referring to GSK’s consumer health spinoff and Novartis’ planned separation of Sandoz.

For its part, Bayer has done some slimming down of its own. In late 2018, the company moved to hive off its animal health business and cut 12,000 jobs to narrow its focus. At that time, over-the-counter brands Coppertone and Dr. Scholl’s landed on the chopping block. That restructuring initiative and efforts to resolve the Roundup lawsuits earned Baumann a short time of reprieve. But now, apparently, some investors still want a complete split from consumer health.

In addition to Union Investment and Bluebell, Elliott Investment Management has also suggested Bayer should consider breaking up, and activist investor Jeff Ubben has also taken a stake in Bayer, Bloomberg reports.

Baumann is slated to step down in April 2024, and Bayer has reportedly started looking for his replacement.