As Bayer's CEO switch nears, activist investor pushes harder for breakup, board changes

Bayer spent years resisting activist investor pressure to oust its longtime CEO Werner Baumann. While the company finally gave in back in February, tapping Roche's Bill Anderson for the role, more changes are needed, one investor group argues.

Bayer’s decision to swap out CEOs is a welcome start, but more “bold” changes are needed to salvage the underperforming company—including a potential supervisory board shakeup—activist investor Bluebell Capital Partners contends.

In a new report, Bluebell urged Bayer to take things a step further after tapping Roche veteran Bill Anderson to succeed outgoing chief Werner Baumann. With the appointment of a “credible, external CEO,” the German conglomerate should now turn its attention to “significantly” refreshing its supervisory board, Bluebell said.

Bluebell is also among the parade of investors angling for a separation of Bayer’s pharma business from its consumer health and crop science arms. Bluebell argues the groups “have no synergies among them.”

A breakup could revitalize Bayer’s finances, Bluebell said, suggesting the process could yield “significant funds” in the €15 billion to €30 billion ballpark. The investor said Bayer should use those potential proceeds to pay down debt and reinvest in pharmaceuticals.

Still, structural changes are “obviously not the only answer to value creation,” Bluebell said. “Ultimately, each of Bayer’s businesses will have to deliver superior returns on its own,” the investor said, noting that “a portfolio optimization will facilitate the achievement” of that goal.

Bayer selected Anderson as Baumann’s heir in February. Baumann is leaving after seven years at the company, which has taken flack in recent years for its underperforming pipeline and a deluge of cancer lawsuits centered on Monsanto’s Roundup weedkiller.

Anderson, formerly Roche Pharmaceutical’s chief, is set to inherit the throne from Baumann in June. He recently said he’s keeping an “open mind” around spinoff pressures, acknowledging that a split is “what everybody thinks should happen.”

More recently, Bayer chairman Norbert Winkeljohann—who helped spearhead the search to replace the company’s outgoing CEO—seemed to garner support for his re-election at this year’s annual shareholder meeting slated for April 28.

Specifically, Institutional Shareholder Services and Glass Lewis pitched in their support for Winkeljohann, alongside Temasek, the sovereign wealth fund of Singapore and a major Bayer shareholder.