NEWS OF THE WEEK BUSINESS
BAYER INTENDS TO STAY THE COURSE European major plans to keep its mix of ag, pharmaceuticals, and chemicals
B
AYER SAYS IT WILL NOT BE
broken apart. "Our position has not changed," Chairman Manfred Schneider said, referring to the company's stance as one of the last firms to combine chemical, pharmaceutical, and agricultural businesses. Schneider's comments, at a recent press conference to announce 2 0 0 0 results, came in response to persistent questions from shareholders, analysts, and the media. Most notably Tweedy Browne Co., a New York Citybased investment firm that holds a small percentage of Bayer stock, has proposed a three-way split of the company "There is no compelling need right now to sell anything off," Schneider maintained. "We don't have a segment that is in trouble." Bayer reported double-digit increases in sales and increased operating profits in 2000 in each of its four major business segments—health care, agriculture, polymers, and chemicals. Overall sales were up 21%, and its operating profit before exceptional items was up 2 0 % . The company's stock value increased 23% in 2000 as well. While Bayer stays its course, some of its main competitors— Aventis, BASF, Novartis, AstraZeneca, and Pharmacia, for instance—have tried to improve investor sentiments by splitting apart chemicals, drugs, or ag businesses. Even with its mix of businesses, Bayer is still rated largely as a chemical company, Schneider admitted, as can be seen from its market capitalization of about 79 times pretax earnings. "That we generate 44% of our HTTP://PUBS.ACS.ORG/CEN
operating result in the health care segment is not yet rewarded by the market," he acknowledged. "There is no doubt that we have ample potential to boost our share price." The company plans to do this by increasing sales and earnings growth in all segments, streamlining its portfolio to eliminate weaknesses, and looking at opportunities for external growth in life sciences through acquisitions and collaborations.
"There is a good chance that steadily improving performance will convince the capital market of the potential Bayer holds in its portfolio as a whole," Schneider said. The company hopes to raise nearly $7 billion for acquisitions in the life sciences. Schneider said Bayer has looked at D u P o n t Pharmaceuticals—as reportedly have executives from Novartis and GlaxoSmithKline—among other possible targets. Bayer wants to tidy up its portfolio, but has postponed plans to sell its final 30% holding in its former imaging subsidiary AgfaGevaert because of market conditions. After divesting a majority stake in 19 9 9, Bayer held on to the remaining stake as a financial investment. Bayer intended to sell Agfa shares and bonds in Europe.-ANN THAYER
Bayer
