Bayer Board Backs CEO After Unprecedented Shareholder Rebuke
(Bloomberg) -- Bayer AG’s supervisory board threw its support behind Chief Executive Officer Werner Baumann after an unprecedented shareholder rebuke over his handling of the $63 billion Monsanto deal and the wave of U.S. lawsuits that followed.
At a fractious, 13-hour Annual General Meeting earlier in Bonn, 55.5 percent of shareholders voted against absolving Baumann and other managers of responsibility for their actions in the takeover last year. Though the shock result isn’t legally binding, it prompted an emergency session of the German drugs and chemicals company’s supervisory board that stretched into the early hours of Saturday morning.
Chairman Werner Wenning said in a statement that while the supervisory board is treating the vote “very seriously,” it “unanimously stands behind” Baumann and his team.
The vote is “an opportunity to support Bayer’s Board of Management in its efforts to swiftly and fully restore the confidence of shareholders and other stakeholders in the company and in its strategy,” Wenning said.
The stunning ballot result at around 10 p.m. local time capped a tumultuous meeting in Bonn, with investors berating Baumann, arguing with Wenning and demanding explanations for the erasure of some 35 billion euros ($39 billion) in market value since the deal. At the heart of the debate was whether Bayer’s leaders properly assessed the legal risks of Roundup, the controversial weedkiller it acquired together with Monsanto.
What Bloomberg Intelligence Says:
“The loss of a nonbinding confidence vote at Bayer’s annual meeting may hasten management changes and the eventual logical split of Crop Chemicals and Pharmaceuticals into separate companies.”
--Christopher Perrella, chemicals analyst
Click here to read the research
Before the vote, Bayer said a majority of shareholders opting not to endorse its managers’ actions at such a meeting hasn’t happened in at least 20 years, and possibly for its entire history. Former Deutsche Bank AG co-CEO Anshu Jain stepped down in 2015 after a 61 percent approval vote from investors. In a separate motion, some 66 percent voted to clear Wenning and the rest of the supervisory board.
Wenning and Baumann have been close for decades and were co-architects of the Monsanto deal. Both are company lifers and grew up in Germany’s Rhein-Ruhr region. Baumann cut his teeth at Bayer under Wenning at the company’s Spanish arm in the 1990s. He became CFO at the tail end of Wenning’s stint as CEO. Then after Wenning became chairman, he hand-picked his old protege for the CEO job.
In his statement, Wenning downplayed the vote, saying it amounted to a clear signal that shareholders want Bayer to "bring out the company’s strengths to a greater extent in the future."
And although a majority of investors voted against Baumann’s leadership, Wenning said merely that "a number of shareholders" have questioned if management did enough to assess the legal risks associated with Roundup.
"The Supervisory Board is convinced that this is the case," Wenning said, citing the opinions of two experts Bayer hired to explore the issue. The board will continue to review shareholder comments and the vote in the coming weeks, Bayer said.
Bayer completed the Monsanto takeover last June after years of wrangling with antitrust regulators. Then in August, a California jury found that glyphosate, the main ingredient in Roundup, caused a school groundskeeper’s cancer. Lawsuits have multiplied since then, totaling 13,400 U.S. cases by April 11. Bayer has vowed to fight in court and says there’s no scientific proof that glyphosate causes cancer.
The company also published results on Thursday, posting a 5.5 percent jump in first-quarter sales after adjusting for currency and portfolio changes for the agriculture unit. Group earnings met analyst estimates and Bayer confirmed its outlook for the full year.
Michael Shah, an analyst at Bloomberg Intelligence, called the result a “much-needed boon to sentiment,” adding that "it’s likely to be short-lived.”
CEO Baumann, under pressure to squeeze value out of the company, is seeking to sell some assets this year including its animal-health business. He said on a conference call following the earnings report that the unit was attracting “high” and “very broad” interest.
Bloomberg reported in March that private equity investors such as KKR & Co. and CVC Capital Partners are exploring bids for the division. Other firms including Advent International, Blackstone Group LP, EQT Partners and Permira may also be interested, people familiar with the matter said at the time. The business could fetch as much as 8 billion euros, though the sale won’t start until the second quarter and valuations may change, they said.
Bayer also expects to make progress by the end of this year with the sale the Dr. Scholl’s and Coppertone brands, Baumann said on Thursday.
Meanwhile, billionaire activist investor Paul Singer’s Elliott Management Corp. has built a stake in Bayer and wants it to consider splitting into separate pharmaceutical and agrochemical makers, people familiar with the matter said late last year.
In an interview with Germany’s Boersen-Zeitung in December, Baumann said Bayer has no plans to break up into separate companies.
©2019 Bloomberg L.P.