‘Zero chance’: Bayer chief rules out capital increase as investors slam turnaround plan

Bayer chief executive Bill Anderson has ruled out a fresh capital increase as he battles investor scepticism over his plan to turn around the indebted and litigation-stricken German drugs and pesticides maker.

Speaking to the Financial Times a day after warning that profits would fall again this year, Anderson stressed that market speculation about selling new shares was unfounded. The management board had discussed the rumour in the run-up to the capital markets day on Tuesday after some investors had enquired about such a plan, he said. But the discussion had concluded with “an emphatic no”.

“I don’t know where that came from. There is zero chance that is going to happen,” he said in an interview.

“Each time the topic was raised, [the management board’s reaction] was an emphatic no,” he said, adding that “we don’t think that we need a capital raise and we have no plans to make [one]”.

Investors have sent the company’s shares to their lowest level in 19 years following Anderson’s decision to ditch immediate break-up plans for the company on Tuesday.

The Texas native, who joined Bayer last summer after his predecessor Werner Baumann was pushed out, argued that Bayer first needed to focus on fixing its financial and operating problems, warning that the group’s profitability was likely to take another hit in 2024.

The shares fell about 8 per cent to €26 on Tuesday, giving the group a market value of €25.6bn.

Bayer is facing a multipronged crisis: it is set to lose patent exclusivity of key blockbuster drugs and is struggling to come to terms with the financial and legal fallout of its ill-fated 2016 acquisition of US seed maker Monsanto, which was masterminded by Baumann and executed despite staunch shareholder opposition. The $63bn purchase saddled the German buyer with billions in debt and exposed it to costly US litigation over Monsanto’s weedkiller Roundup, which users blame for their cancer.

Anderson, a former executive at Swiss rival Roche, said he was seeking to “rebase expectations”. Asked if he needed to go back to the drawing board after the share price slump, he said “no, certainly not”, insisting he had received more positive feedback from key shareholders.

“The owners that I talked to basically said: ‘Hey, nice job! You guys deliver what you needed to deliver,’” he said.

Anderson praised activist investor Jeff Ubben, who built a 0.8 per cent stake in Bayer a year ago and last month was nominated to join Bayer’s supervisory board, as a “vigorous advocate for shareholders” and a “very constructive person” who wanted to create value by “building a company and not tearing [it] down”.

Last month, Bayer slashed its dividend by 95 per cent as it decided to pay out just the legal minimum for three years in a move that will preserve a cumulated €6bn in cash by 2026.

Anderson during the interview said a key argument against a capital increase was how dilutive it would be to existing investors. “I’m a shareholder too, and I don’t want that.”

He pointed out that the management board was not authorised to conduct a capital increase as it first needed a resolution from the annual general meeting. “We’ve not asked for that in recent years that we have no plans to ask this year.”

The executive said the views of bondholders and equity investors clashed over the idea of a potential break-up.

“We’ve heard from our bond investors [that] they don’t like the talk of a split up,” he said, adding that the allocation of Bayer’s €34.5bn in debt on separate entities would have created “some strange leverage ratio dynamics” that could have made it harder to refinance debt.