Bayer sees no quick fixes after bankers game out break-up
Bayer headquarters in Leverkusen. Has decided it should avoid responding to any potential calls for a breakup until the company finishes its strategic review. Picture: Bayer
Bayer hired several teams of bankers for a strategy simulation game that studied various breakup scenarios, according to people familiar with the matter. Their conclusion: Sweeping changes to the troubled German conglomerate will not be easy.
The Leverkusen-based company hired two teams as it explored the pros and cons of a breakup, said the sources. Team Red simulated an activist campaign calling for splitting up Bayer’s businesses, and Team Blue advised on how to respond to the approach.
Bayer came to the conclusion that it should avoid responding to any potential calls for a breakup until the company finishes its own strategic review so as to avoid raising expectations among shareholders, the sources said.
The simulation took place before Bayer announced third-quarter results and a recent series of high-profile setbacks, but it has not yielded new results in the meantime. The German conglomerate’s shares suffered their biggest drop ever on November 20, losing about €7.3bn in market value, after major courtroom and drug-development setbacks raised pressure on its new leader to outline a turnaround plan. Bill Anderson, who became chief executive in June, said earlier this month that he is weighing whether to separate its consumer-health or crop-science operations.
The simulation found that any divestiture of Bayer’s consumer health business would likely trigger a massive tax hit potentially jeopardising the benefits of a deal, the sources said.
To be sure, the review has not been completed yet and Bayer may either find a more tax-efficient structure or a buyer willing to pay a significant premium, they said.
Bayer shares fell 3% in yesterday’s trading session and have now fallen 40% from a year ago. A representative for Bayer declined to comment.
Bloomberg
