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LONDON (Reuters) – Bayer (OTC:BAYRY) is a “conglomerate” that needs to make major changes including “de-merging” two of its three business arms, investor Artisan Partners (NYSE:APAM) told Reuters on Friday.
Artisan wants the drugs to-pesticides company to demerge its over-the-counter and pharmaceutical units, it said.
“Recently we wrote a letter to the conglomerate Bayer — and it is a conglomerate,” David Samra, founding portfolio manager of Artisan’s International Value team, said in an interview.
Bayer has a “whole host of problems” including “too much debt,” Samra said.
Bayer’s new CEO Bill Anderson said this month he is not ruling out any options as part of his ongoing review of the diversified company’s strategy and structure.
Before taking the top job in June, Anderson said he was keeping an open mind on whether to break up the company into smaller pieces, as some investors have demanded, saying other investors opposed the idea.
Artisan is Bayer’s sixteenth biggest investor, according to Refinitiv data.
We suggested “that they cut the dividend to zero because they need the capital to effectively operate and reinvest back in their business,” Samra said, adding that the letter was sent prior to Bayer’s earnings results announcement on August 8.
“Then in their earnings release, the company specifically came out and said they’re committed to their dividend which is the exact opposite of what they should be doing in the long term best interest of their business.”
Bayer declined to comment.
Samra said that though the chairman of Bayer’s supervisory board has not directly written a letter back to Artisan, they have “been in contact.”
Samra said Artisan “has not suggested specifically how (Bayer) should restructure their business” in the letter.
The company is made up of “one properly scaled” business that has “long-term advantages”, while it’s over-the-counter pharmaceuticals and pharmaceuticals units are “sub-scale”, low-margin and “probably more valuable in the hands of somebody else,” he said in the interview.
