By Ludwig Burger and Patricia Weiss
FRANKFURT (Reuters) -Bayer is facing demands from activist investor Bluebell Capital Partners to break up, a person familiar with the matter told Reuters, pushing shares in the diversified health and agriculture group to a five-week high.
The source said Bluebell had invested in Bayer (OTC:BAYRY) a few months ago and is pushing for a sale of the company's consumer health unit and, at a later stage, for a separation of Bayer's pharmaceuticals and agriculture businesses.
Consumer health products, such as Aspirin painkillers and Clarityn allergy relief, account for a little over 10% of Bayer's sales. The crop science division generates nearly 50% of group sales and pharmaceuticals around 40%.
Bluebell is also seeking to have supervisory board Chairman Norbert Winkeljohann and Chief Executive Officer Werner Baumann replaced, the person said.
Bluebell did not immediately respond to a request for comment. The size of Bluebell's holding in Bayer was not immediately clear.
Baumann, who began pursuing a takeover of U.S. seed maker Monsanto (NYSE:MON) shortly after being promoted to CEO in 2016, is due to leave Bayer when his second term in the job expires next year.
A stalwart of German industry with a nearly 160-year history, Bayer has lost over 40% of its market value since its 2018 takeover of Monsanto, which was followed by a string of lawsuits over allegations that Monsanto's Roundup weedkiller causes cancer.
On Monday, another activist investment fund, hedge fund veteran Jeffrey Ubben's Inclusive Capital Partners, said it had also acquired a stake in Bayer.
A third activist investor, Elliott Management, took a 1.1 billion euro stake in Bayer in 2019 but has since kept a low profile.
A source familiar with the matter told Reuters that Elliott, founded by Paul Singer, was still invested in Bayer but would remain passive at least while the search is on for a successor to Baumann.
Bayer shares were up 3.6% at 1445 GMT, their sixth consecutive trading session of gains. Bluebell's investment was first reported by Bloomberg late on Tuesday.
MERITS TO BREAK-UP
One institutional investor, which recently sold its Bayer shares, said there were merits in a break-up but that management had not taken previous investor proposals into account. The investor, which asked not to be named, said that was not unusual for a German company.
Investment bankers have said Bayer's pharmaceuticals division on its own would easily attract takeover interest from larger global players.
A spokesperson for Bayer said the company was open in general for constructive dialogue with stakeholders and declined to comment further.
Labour representatives have considerable influence in strategic decisions at German listed companies thanks to the country's system of co-determination, and members of government could weigh in when businesses at well-known companies like Bayer face a hostile takeover.
Bluebell, launched three years ago, has a history of challenging the policies and executives of some of the world's biggest companies, including GSK, Glencore (OTC:GLNCY) and Vivendi (PA:VIV), while owning very small stakes.
It was instrumental in ousting the boss of French food giant Danone in 2021 and recently has been campaigning for BlackRock (NYSE:BLK) CEO Larry Fink to quit, in part because of the fund giant's environmental, social and governance (ESG) efforts.
Markus Manns, a portfolio manager at Union Investment, one of Bayer's 10 biggest shareholders, said it would be the responsibility of a new chief executive to review the company structure.
"It's too early for a break-up but the separation of consumer health would be an obvious way to create additional value," said Manns, adding that Union Investment was not in contact with Bluebell.
The upswing in Bayer shares this week, fuelled by the prospect of billions in additional sales from its drug development pipeline, has done little to change the bigger picture of years of market underperformance.
The stock has been weighed down by litigation over glyphosate-based Roundup and over environmental pollution with chemicals known as PCBs, which are legacy issues from the takeover of Monsanto for more than $60 billion in 2018.
Despite strong demand for its farming products, improved prospects of its pharmaceuticals business and a number of recent courtroom victories for the German group, the company is valued at 53 billion euros ($57 billion) on the stock market, well below the price tag for Monsanto.
($1 = 0.9308 euros)