Restructuring Healthcare

Bayer To Reorganize After Spin-Off

Bayer Marijn Dekkers CEO source DPA
Marijn Dekkers, Bayer CEO, is reorganizing the German firm.
  • Why it matters

    Why it matters

    Bayer’s reorganization could help it to better compete with rivals, including Pfizer and Novartis.

  • Facts

    Facts

    • Bayer sells drugs and crop protection products; it will spin off its plastics and chemicals business next month.
    • Healthcare is Bayer’s most important line of operations, accounting for almost half of the company’s revenue and two-thirds of operating profit.
    • Bayer bought Merck’s over-the-counter drugs operations last year for almost $14 billion.
  • Audio

    Audio

  • Pdf

Marijn Dekkers, the chief executive of Bayer, is pushing to increase the pace of change at Germany’s largest drugs maker.

Covestro, the company’s plastics subsidiary, is going public on the 2nd of October and the share sale could net around €2.5 billion, or $2.8 billion, Bayer said on Friday.

Moreover, the supervisory board signed off on the Dutchman’s second major project in the far-reaching corporate restructuring: Bayer has decided to scrap the management holding company with independent subgroups by January 1, 2016.

Instead, an integrated and centrally-lead corporation will be created, whose new executive board will also be responsible for the operative business. Bayer will be based in the future on three divisions: Pharma, which sells prescription drugs, Consumer Health, which sells over-the-counter drugs, and Crop Science, which produces pesticides, amongst others.

Another change of note will be the first female executive board member at Bayer, something never seen in the company’s 152-year history. Beginning January 1, 2016, the native South African Erica Mann is moving up to the executive floor as head of the new Consumer Health Division.

The 56-year-old has been heading up Bayer’s consumer care business, which sells over-the-counter drugs like aspirin and Bepanthen, from the United States. Bayer’s over-the-counter business has grown tremendously, above all through the 2014 takeover of Merck & Co.’s consumer care division for just under $14 billion.

“This is a new organization and not a restructuring. That is why there is no need for a severance compensation program.”

Marijn Dekkers, CEO, Bayer

But that isn’t the only reason that Bayer is creating a separate division for the over-the-counter drugs business. In contrast to pharmaceuticals, the company needs marketing and sales there that are more along the lines of consumer product business.

Mr. Dekkers, who is scheduled to resign as chief executive at the end of next year, spoke with Handelsblatt about the goals of the new corporate organization.

 

Mr. Dekkers, isn’t the integration of the subgroups also about lowering costs? The duplication of roles, particularly those in the service areas, will be eliminated.

That is not a prime concern. Our new organization is supposed to optimally support the strategy of our life science business. We want to increase innovation and customer focus and improve business processes. The new structure makes us faster, more efficient and more flexible. Whatever is gained from that in increased efficiency will be used as an additional resource, so for research into new active substances, their development and their marketing.

You want to keep the number of jobs unchanged. Will the restructuring program result in employees leaving voluntarily, for instance through a severence compensation program?

In order to continue to be successful globally in our markets, we need the most capable employees, experts and new talent. For that reason, we will continue in the future to hire and train. Don’t forget, we are acting from a position of strength. This is a new organization, not a restructuring. That is why there is no need for a severance compensation program.

 

020 Bayer - WTB 2014 resume

 

Where do you see the advantages of integrating subgroups?

The further strengthening of research and development is one of the key goals of our new organization. This remains a core task of the divisions. At the same time, we are increasing the responsibility of the innovation board, which will be more involved in decision making than before. The same holds true for the technology board. The strategic deliberations go beyond that: research has brought enormous advances.

For example?

For instance, through the research into the genome. Today we better understand the biochemical processes that take place in living organisms. Molecular mechanics follow common rules in all living things, as different as they may appear to us. We want to use these commonalities under one roof to our advantage – in research, development, and ultimately also to our advantage in business.

Are you going to hang on to the animal health business unit? A sale would provide leeway for additional takeovers in other fields.

Animal Health has grown well in past years without significant acquisitions. We are globally number one in the pet segment. The business unit is generating stable cash flows. And in the new organization, Animal Health has optimal support for focusing on the market and customers. Basically, we can finance additional strategic purchases that provide us access to an interesting technology or a better market position without having to sell off existing businesses.

Covestro is going public in October. When do you plan to divest yourself of the remaining shares?

A divestment of further shares in the first 180 days after the initial listing is out of the question. We will concentrate fully on the Life Science business and will completely dispose of our shares in due course. No decision has been made to date as to when.

 

Bert-Friedrich Fröndhoff leads a team of reporters which covers the chemicals, healthcare and services industries at Handelsblatt. To contact the author: froendhoff@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!