Bayer AG’s long-time investor Temasek Holdings is pushing for the removal of CEO Werner Baumann, according to people familiar with the matter, ratcheting up pressure just as the German crops and drugs giant started reversing a years-long stock slump.
The Singapore state investor has communicated its displeasure about current leadership to the company and supervisory board Chairman Norbert Winkeljohann, the people said, asking not to be identified discussing non-public information. Temasek has longstanding concerns about Bayer’s operating performance under Baumann and the company’s lack of succession planning, they said.
The big-name investor is considering options ahead of the shareholder meeting next month including requesting a no-confidence vote in Baumann or voting against ratifying the performance of the management, said the people. Either step would significantly raise pressure on Bayer’s supervisory board to reshuffle leadership.
No final decisions have been made on the course of action and it may not lead to Baumann’s ouster, the people said. Temasek declined to comment. Bayer referred to a response it gave to Swiss investor Alatus Capital and declined to comment further.
Temasek is the second shareholder to challenge management ahead of the annual general meeting. Alatus has already objected to ratifying the performance of Baumann and his management team at Bayer’s April 29 meeting, pointing to a significant loss in market value during his tenure.
But Temasek's move carries much more weight and this activist-type approach is rare for the firm. Temasek has been a major shareholder since it built a roughly 4% stake in the German company in 2018, helping Bayer complete the controversial US$63 billion takeover of Monsanto Co. Investor frustration with leadership could also trigger Bayer, once the darling of Germany’s blue-chip DAX Index, to revisit calls to break itself up between agriculture, pharmaceuticals and consumer healthcare units.
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Baumann, 59, is one of the primary architects of Bayer’s controversial mega-takeover of Monsanto. He spearheaded the deal only weeks after becoming CEO in spring 2016 and has consistently maintained that the transaction made strategic sense.
Yet weeks after the deal closed in mid-2018, Bayer lost the first of several US trials over whether Monsanto’s product Roundup causes cancer, which Bayer denies. That brought on a tidal wave of litigation, which Bayer has struggled to resolve. The company has pledged to spend as much as US$16 billion to finally put the matter behind it.
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Bayer’s shares are down 39% since the Monsanto deal closed. The stock performed well in recent months, however, buoyed by surging prices for agriculture commodities. The shares are up 29% so far this year, making the timing of Temasek’s move surprising for some. The Singapore investment firm, which hasn’t made its views public yet, hopes the share rebound is sustainable but continues to be concerned about the long-term performance, the people said.
Vote of Confidence
Alatus, whose letter has been posted on Bayer’s website, said the company has failed to lay out and implement a strategy that produces long-term growth for the crop science and pharmaceutical divisions. It also called for allowing shareholders to vote on members of Bayer’s management team individually at the meeting, rather than as a whole.
Bayer rejected the latter request, saying it’s not legally permissible under the pandemic-era virtual shareholders meeting setup. Temasek is concerned by the German company’s rejection of and reasoning for dismissing the Alatus request, the people said.
In responding to Alatus, Bayer argued that Baumann’s team has succeeded in the past year, citing earnings growth and progress in resolving litigation. The shareholder vote in question is whether to absolve Baumann and other managers of responsibility for their actions last year -- effectively a vote of confidence on their performance during the 2021 fiscal year.
All three of its divisions grew last year, led by the crops unit. In the letter responding to Alatus, posted on Bayer’s website, the company pointed to the looming global food crisis resulting from Russia’s invasion of Ukraine. Bayer’s supervisory board has “unreserved confidence” in Baumann, his team and their strategy, the company wrote.
Baumann survived the past three annual meetings, including in 2019 when he actually lost a shareholder confidence vote. That vote, however, was largely symbolic and Bayer’s supervisory board has continued to back him.
In September 2020, Bayer extended Baumann’s contract through April 2024, one year shorter than a normal term. Baumann has said he will step down after that.
