Bayer to Slash Dividend by 95% as It Wrestles With Roundup Woes

(Bloomberg) -- Bayer AG plans to slash its dividend by 95% in an effort to dig itself out of a hole created by the acquisition of Monsanto Co. that saddled the German company with massive debt and waves of litigation.
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While a dividend cut was expected, the reduction highlights the challenges facing the drug and crop sciences company as it tries to stem its cash drain, rebuild its pharmaceutical pipeline and recover from the $63 billion takeover of the owner of Roundup herbicide in 2018.
Bayer said it will offer investors only the legal minimum required under German law, paying out 11 euro cents ($0.12) per share for 2023, down from €2.40 last year.
The company has been facing thousands of lawsuits claiming that Roundup caused cancer, which it denies. The debt pile of more than €38.7 billion, according to a recent filing, is becoming increasingly hard to manage amid growing legal costs and rising interest rates.
Analysts at Morgan Stanley wrote in a recent note that Bayer would have to favor a “more stringent dividend policy,” including a potential suspension of the payout, if it was to make headway in paying down debt.
Bayer shares rose about 1% on Monday after the dividend cut was announced, as investors reacted to the prospect of at least a meager payout. But they’re still down more than 70% since the Monsanto transaction.
Chief Executive Officer Bill Anderson, who was brought in last year to try to revive the group, said the decision to only pay out a legal minimum for the next three years “was not taken lightly.”
Anderson has already instituted operational changes designed to speed up decision-making, cutting layers of management and eliminating thousands of jobs. He’s also reviewing the conglomerate strategy, which currently includes three divisions, focused on crop science, pharmaceuticals and consumer health products.