Bayer to Cut Thousands of Jobs
German Group to Sell Animal Health business, the Consumer Health brands Coppertone and Dr. Scholl’s, and 60 % stake in Currenta
As most expected following the $63 billion acquisition of Monsanto in August, Bayer has announced a major overhaul of its global organizational structure up to 2022 to focus more clearly on life sciences, save costs and reduce debt.
Following a portfolio review by management, the Leverkusen group’s supervisory board on Nov. 29 approved profitability-boosting measures aimed also at creating more confidence among shareholders.
The Bayer share has been on a downward curve of late, due not least to the – now more than 9,000 – pending lawsuits over the herbicide active ingredient glyphosate.
Speaking to journalists, CEO Werner Baumann said the foreseen corporate overhaul will involve both structural and strategic changes, encompassing wide-sweeping job cuts as well as asset sales. Altogether, they are anticipated to improve competitiveness and, combined with synergies from the Monsanto integration, add €2.6 billion to annual earnings.
As analysts have speculated for some time, the Animal Health business is being put up for sale. Added to the list are two less profitable products in the Consumer Health business acquired from US Merck for $14.2 billion in 2014 – the respective foot care and sun care brands Dr. Scholl’s and Coppertone. Bayer’s 60% stake in site infrastructure company Currenta, a joint venture with Lanxess (40%) is also on the sale block.
Not all long-time Bayer watchers foresaw the extent of the job cuts envisioned across the global workforce – which Baumann said will total 12,000, with a “significant” number in Germany. If all asset sales are successful, roughly 9,000 additional employees could leave the Bayer payroll and transfer to new owners.
With 4,100 in total, the CropScience segment will bear the brunt of job losses as the Bayer and Monsanto activities are combined. Here, management expects integration synergies to deliver profit contributions to EBITDA before special items of €1.04 billion annually.
In Pharmaceuticals, most of workforce reduction will stem from Bayer’s change of focus in R&D. Baumann said 900 fewer employees will be needed in future as the group emphasizes external collaboration. Additionally, the Wuppertal, Germany, plant producing the Factor VII blood coagulation drugs Kogenate and Kovaltry and the new hemophilia treatment Jivi will be shuttered, with the loss of 350 jobs.
Going forward, Bayer’s Factor VII products will be made solely at the group’s plant in Berkley, California, USA. Baumann explained that overcapacity and newer products – analysts pointed to the launch of Roche’s new Hemlibra – are pressuring the German group’s sales, and only one plant is now required.
In the aftermath of Thursday’s announcements, market talk focused on how much money the assets up for grab could fetch and who might buy them. Analysts told the news agency Reuters that Dr. Scholl’s and Coppertone together could command around €1 billion, and both Reckitt Benciser and Procter & Gamble could be interested. Separately, other analysts put the price tag at around €800 million.
Animal Health could fetch €6-7 billion, the news agency’s sources said, a figure backed up elsewhere. Unclear was who might buy it, as the recent flurry of M&A transactions across the sector has left many businesses already partnered. The consensus was that it in any case would find a buyer.
With the Currenta stake likely to be worth €1.5 billion, the question of a buyer or buyers could likely focus on whether Lanxess is willing to increase its stake and how much Bayer’s former engineering plastics offshoot Covestro could or would pay to take a share.
With its ownership in Covestro already pared down to 7% and a full separation near, Bayer said it doesn’t have enough production assets in the chemical parks operated by Currenta to make it worth keeping a stake.