Bayer’s headquarters in Leverkusen. He decided to avoid responding to potential calls for dissolution until the company completes its strategic review. Photo by : 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 has hired two groups to analyze the pros and cons of a separation, the sources said. The red team simulated an activist crusade calling for the spin-off of Bayer’s business, and the blue team gave recommendations on how to respond to this approach. .
Bayer has concluded that it deserves to avoid responding to potential calls for a spin-off until the organization has completed its own strategic review, to avoid raising expectations among shareholders, the resources 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 sale of Bayer’s customer health care business would likely cause a large tax cut, which could jeopardize the benefits of the deal, the resources said.
It’s true that the review is still complete and that Bayer can find a more tax-efficient design or a customer willing to pay a significant premium, they said.
Bayer’s shares fell 3% in yesterday’s poll and are now down 40% from a year ago. A representative for Bayer declined to comment.
Bloomberg
Analysis
© Examiner Echo Group Limited, Linn Dubh, Assumption Road, Blackpool, Cork. Registered in Ireland: 523712.
© Reviewer: Echo Group Limited