December 7, 2018 / 4:32 PM / 4 days ago

Exclusive - Activist investor Elliott has stake in Germany's Bayer: sources

FRANKFURT/NEW YORK (Reuters) - Activist investor Elliott has taken a position in Germany’s Bayer (BAYGn.DE), adding to the slew of investments the fund has made in German companies, three people familiar with the matter told Reuters on Friday.

FILE PHOTO: A plant belonging to Germany's largest drugmaker Bayer is seen in Leverkusen February 22, 2013. REUTERS/Ina Fassbender/File Photo

Elliott has held shares in Bayer for more than a year, two of the sources said, declining to specify the size of the stake. A holding of more than 3 percent would trigger mandatory disclosure under German securities trading rules.

While Elliott has tried to talk to Bayer’s top management it has not been able to get a meeting with Chief Executive Werner Baumann or his colleagues, one of the sources said, adding that Baumann also declined to talk to other hedge funds invested in the company.

News of the Elliott stake comes in the aftermath of Bayer’s $63 billion takeover of Monsanto. The German company faces thousands of lawsuits over a suspected cancer link to the U.S. company’s Roundup weedkiller.

Elliott, founded and run by Paul Singer, declined to comment, as did Bayer.

Elliott also owns stakes in steelmaker ThyssenKrupp (TKAG.DE), utility Uniper (UN01.DE) and food processing machinery maker GEA Group (G1AG.DE).

The presence of such activists on shareholder registers can raise pressure on company management to change strategy and improve shareholder returns. In the case of Thyssenkrupp for instance, where Swedish investor Cevian holds a larger stake, a new CEO was appointed who announced the company would be broken up into two parts.

Bayer shares, which had been down 0.8 percent before the news, closed 1.7 percent higher in Frankfurt.

But the stock has lost 38 percent so far this year, mainly due to risks relating to the more than 9,000 lawsuits brought over Roundup.

Investors have also urged Bayer to strengthen its drug development pipeline, even though its financial firepower was depleted by the Monsanto deal.

Chief Executive Werner Baumann last week unveiled plans to sell businesses, including the animal health operations and two consumer healthcare brands, and cut around 12,000 jobs, vowing to revive earnings growth.

PLANNED AUCTION

Bayer will kick off the planned auction of consumer brands Dr. Scholl’s and Coppertone early next year, people close to the matter said.

The auction of footcare brand Dr. Scholl’s, on which Bayer is working with investment banking boutique Sawaya, is expected to start at the end of January, they said.

The Coppertone sale, led by Citi (C.N), is likely to start towards the end of the first quarter, one of the people said.

The two brands could fetch a combined 1 billion euros ($1.1 billion), analysts have estimated.

Procter & Gamble (PG.N) and Reckitt Benckiser (RB.L) are likely to be among potential suitors for the consumer brands, for which they vied with Bayer when the German company bought them with other assets from Merck & Co (MRK.N) in 2014, people close to the matter have said.

Bayer is also selling its animal health division and Bank of America (BAC.N) and Credit Suisse (CSGN.S) are working on the sale, people close to the matter said.

The animal health business, which could fetch between 6 and 7 billion euros, has whetted the appetite of several private equity groups.

Bayer’s rivals in veterinary medicine may face antitrust issues if they tried to buy the whole business. But some of them are expected to express interest either in the part of the business which makes drugs for livestock or the part that focuses on companion animals.

Bayer ranks fifth in veterinary medicine, behind Zoetis (ZTS.N), the former Pfizer (PFE.N) unit, Elanco (ELAN.N), formerly of Eli Lilly (LLY.N), unlisted Boehringer Ingelheim, which acquired animal health assets from Sanofi (SASY.PA), and drugmaker Merck & Co (MRK.N).

Bayer’s animal health business, the largest maker of flea and tick control products for cats and dogs, needs to grow to compete with larger rivals but Bayer lacks the financial firepower to sponsor big moves, sources have said.

Bayer and the banks declined to comment, except for Sawaya which was not immediately available to comment.

Bayer earlier this week reduced its combined sales estimate for its most promising experimental drugs, acknowledging it needs to do more to replenish the development pipeline.

Writing by Ludwig Burger; Editing by Douglas Busvine/David Holmes/Jane Merriman

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