According to the Bloomberg news agency, Temasek has written to Bayer’s supervisory board chairman Norbert Winkeljohann requesting a vote of no confidence in the CEO or a vote against ratifying management’s 2021 performance.

Temasek, which has been a Bayer shareholder since 2018, building a stake equivalent to around 4% in the German pharmaceuticals and agrochemicals producer, is said to have longstanding concerns about its operating performance under Baumann and the company’s perceived lack of succession planning.

Prior to the disclosure of Temasek’s petition, another shareholder, private equity investor Alatus Capital, said management’s performance in 2021 should not be ratified. "The actions of Mr. Baumann have led to significant shareholder value destruction at Bayer," Alatus asserted, saying the share price had declined by 48% (at current count 39% or 25%, depending on who is counting) since the Monsanto takeover and “significantly underperformed market indexes and peers.”

Alatus has been critical of Bayer’s management for what it sees as the lack of a strategy to assure long-term growth for the crop science and pharmaceutical divisions. The private equity group sought to have the shareholders meeting vote on members of the managing board individually, but the company replied that this is not legally possible at a virtual event.

Observers said the Singapore group’s move carries much more weight than that of Alatus as it normally does not take an activist-approach; however, neither is likely to succeed as most shareholders have indicated that they are content to have Baumann remain in the position until his term ends with the annual general meeting in 2024.

The CEO, who followed Werner Wenning in 2016, endured a no-confidence vote in 2019 as lawsuits from plaintiffs blaming Monsanto’s Roundup herbicide for their cancer mounted. The negative vote nonetheless had no consequences. Baumann remained in office and prevailed against two subsequent challenges.

Although the immense cost of the protracted Monsanto litigation forced Bayer to sell certain assets, its financial performance has improved of late, with 2021 figures seeing an overall 10% sales gain propelled by its pharma division, in particular the macular degeneration treatment Eyelea. This turnaround, though modest, has given rise to questions as to why Temesak and Alatus are seeking to oust Baumann now. 

Two major shareholders’ groupings have clearly expressed their support for the CEO. “An early termination of his contract would only cause chaos,” Janne Werning of Union Investment, told Bloomberg. Marc Tungler of the German Association for the Protection of Securities (DSW) called the initiative “absurd theater, in terms of content and timing.”

Bayer’s supervisory board has said it has “unreserved confidence “in its CEO. In an unusual opinion piece, the Reuters news agency suggested that this trust might be misplaced, called for a “strategic rethink” and weighed in on the long-running discussion over whether the pharma and agro union should stay in place or be broken up.

“Shareholders could have lost patience years ago,” Reuters said. The company lost more than €30 billion of market value in 2019 due to lawsuits. A partial settlement in 2020 for a relatively modest $10 billion should thus have been a source of relief. Yet Bayer’s market value remains €32 billion below its pre-cancer litigation levels. “

“The poor performance – in the last four years, Bayer shares have lagged Germany’s DAX benchmark by 45% – suggests minimal merit in keeping pharma and farming in the same barn. And the financial logic of a breakup looks compelling,” Reuters said.

A breakup would create value, and give Bayer’s individual bits more focus, the news agency added. “As the principal architect of the Monsanto deal,” though, it said,” Baumann is hardly the right person to lead it. Waiting four years for a mega-merger to bear fruit is long enough. Bayer needs to start ploughing separate furrows.”

Author: Dede Williams, Freelance Journalist