Bayer Shares Recover After Company Slashes Dividend to Cut Debt

By Pierre Bertrand

Bayer shares fell Tuesday and then bounced back after the German pharmaceutical and agricultural company said it would cut its dividend to reduce debt as it looks to overhaul its operations, marking its latest attempt to leave issues from its $63 billion acquisition of weedkiller maker Monsanto behind.

At 0911 GMT, shares traded 0.2% up at EUR28.95, recovering from losses in earlier trade. As of Monday's close, shares had halved their value compared with a year earlier.

Bayer's planned restructuring of its operations and its slashed shareholder payout comes after the Monsanto deal in 2018 left the company saddled with debt and brought with it a legal baggage related to the weedkiller Roundup that included lawsuits from consumers.

Bayer, which in November ruled out a three-way split of its crop-sciences, pharma and consumer-healthcare businesses, said Monday that it is well under way in implementing a new operating model. The company is due to host a capital markets day next month.

"The aim of the new operating model is to make the company much more agile and significantly improve its operational performance. This also includes significant job reductions," Chief Executive Bill Anderson said.

Bayer, whose products also include aspirin, said it would change its dividend policy as it faces a high level of debt, high interest rates and what it said was a challenging cash-flow situation.

The company said that it would pay the minimum dividend allowed during the next three years, a measure it said it would present for shareholder approval in April. As a result, it proposed a 2023 dividend of 0.11 euros (12 U.S. cents) a share, down from EUR2.40 for 2022.

Analysts expected Bayer to pay a dividend of EUR1.92 a share for 2023, according to consensus estimates compiled by Vara Research.

"One of our top priorities is reducing debt and increasing flexibility," Anderson said. "Our amended dividend policy, which considered investor input and was not taken lightly, will help us do so."

Bayer's dividend cut will reduce cash outflow by EUR2.3 billion a year over the period, Jefferies analysts said in a research note, a move they say is a minor positive. It shows the extent of the operational and financial challenges Bayer faces, they said, adding that further strategic actions will be needed to restore the company's balance sheet.

Write to Pierre Bertrand at pierre.bertrand@wsj.com

(END) Dow Jones Newswires

February 20, 2024 04:29 ET (09:29 GMT)

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