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4-Traders Homepage  >  Equities  >  Xetra  >  Bayer AG    BAYN   DE000BAY0017


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Bayer : CEO Takes Risk in Bid for Monsanto

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06/26/2016 | 05:24pm CEST
By Christopher Alessi 

FRANKFURT -- Bayer AG's $62 billion offer for Monsanto Co., which would be the largest corporate takeover ever by a German company, is also Chief Executive Werner Baumann's risky power play after a 28-year ascent.

Less than two weeks after assuming the top job on May 1, Mr. Baumann surprised investors by offering to buy the U.S. agrochemicals company. The deal would create the world's biggest seed and pesticide business.

Mr. Baumann, 53 years old, started his career in Bayer's finance department, rose to chief financial officer and most recently served as strategy chief. Colleagues describe him as fastidious and single-minded when he decides on a course of action.

His time as CEO has been -- and could remain -- defined by the deal.

"The last six to seven weeks have been really dominated [by] Monsanto," Mr. Baumann said in an interview. He has been hopping among cities and meetings, selling the deal to wary investors and a skeptical public.

Bayer's bid would reshape the 150-year-old company that invented Aspirin in the 1890s and has recently focused on expanding its health-care division.

The personal stakes are high for Mr. Baumann, who is struggling to sway investors following Monsanto's public rebuff of Bayer's offer late last month. He has since reiterated Bayer's $122-a-share bid and said he plans to continue negotiating with Monsanto in private.

"There are a number of investors who would have liked us to further strengthen our health-care business -- particularly pharma," Mr. Baumann said. But enhancing Bayer's agrochemical division with Monsanto now "is the most attractive proposition for the company and for shareholders."

The pharmaceutical sector held no targets similarly attractive, he said.

Investors and analysts have said that the two companies' crop businesses are complementary because Bayer is a leader in crop chemicals and Monsanto in seeds. But some remain unconvinced the tie-up would generate value for Bayer shareholders and fear adding to Bayer's high debt level.

The company's net debt stood at EUR17.45 billion ($19.71 billion) last year, more than double its EUR7 billion level in 2011.

"We are concerned that the merged company will be left with a highly geared [leveraged] balance sheet, while there is always the risk that Bayer management may take their eye off the ball running the pharma business as their time is spent dealing with the process of integrating Monsanto," said Greg Herbert, a fund manager at Jupiter Asset Management Ltd., a Bayer investor.

Bayer's share price fell about 15% after initial reports of the deal last month and has since recovered slightly.

Mr. Baumann first contemplated a Monsanto takeover last year, after its failed $46 billion bid for Syngenta AG of Switzerland, when he was running strategy, according to two people familiar with internal deliberations. Bayer's then-CEO Marijn Dekkers strongly opposed the idea, one of these people said.

Mr. Dekkers, who declined to be interviewed for this article, was the first outsider ever appointed CEO of Bayer. He reshaped the company around its so-called life-sciences businesses during his six-year tenure, presiding over the launch of new blockbuster drugs, a $14.2 billion acquisition of U.S.-based Merck & Co.'s over-the-counter drug business and the $10 billion spinoff of Bayer's specialty plastics division, Covestro AG.

Mr. Baumann has rejected frequent comments that his strategy diverges from that of Mr. Dekkers, with whom he spent six years on the management board.

"The company has been managed in a tradition of sustainability and leadership for quite a number of decades," Mr. Baumann said. "In that respect, I'm following what Marijn did in running the company."

Mr. Baumann said Bayer had to act quickly amid a wave of consolidation in the agrochemical industry to avoid being sidelined. Rival seed developers Syngenta, Dow Chemical Co. and DuPont Co. have all recently struck deals.

"As one of the major players in the industry, it has always been clear that we needed to take a position," he said.

Colleagues say Mr. Baumann is deliberate but decisive.

"If he says 'yes,' it's a yes. If he says 'no,' it's a no," said Christine Bortenlänger, a board member of Deutsches Aktieninstitut, an organization that represents interests of Germany's publicly traded companies and where Mr. Baumann serves as president. Ms. Bortenlänger said Mr. Baumann is more "youthful" than other "old-style top managers."

He is "a bit like the eager-beaver in school," said one person familiar with the CEO. "Even when he has no role -- at a press conference or the annual shareholders meeting -- he shows up with at least two binders full of Excel spreadsheets, all color-labeled and earmarked," the person said.

Mr. Baumann said he is "able to see the big picture but I like to be hands-on."

A former employee who worked closely with Mr. Baumann said he is "very driven and ambitious" and has "high standards for himself and others." The ex-colleague said his approach worked well when he managed the Covestro spinoff.

The German press has characterized Mr. Baumann as an unpretentious everyman from a backwater city. But some who have worked with him say that image is at odds with his taste for luxury cars and expensive suits.

Mr. Baumann calls himself "very patient" and a "fairly good" listener.

"I'm a fairly modest and humble person," he added.

Write to Christopher Alessi at christopher.alessi@wsj.com

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