Jeff Ubben takes $500mn stake in Bayer

US activist investor Jeff Ubben has taken a $500mn stake in Bayer, the German conglomerate still reeling from litigation over its weedkiller Roundup and years of shareholder discontent.

Ubben’s stake in Bayer, which is held through his firm Inclusive Capital Partners, amounts to almost 1 per cent of the company, the San Francisco-based firm said on Monday.

The investment comes at a crucial time for Bayer, which is looking for a new leader to replace chief executive Werner Baumann who is due to leave his post in 2024, according to people familiar with the matter.

The German businessman has been heavily criticised by shareholders for his ill-fated decision in 2016 to acquire seedmaker Monsanto, the deal that brought Roundup under Bayer’s ownership.

The $63bn takeover, which faced shareholder opposition from the start, is widely regarded as one of the most damaging acquisitions in recent times.

Ubben, known on Wall Street for a softer approach to activist investing, has already received support from at least one of Bayer’s largest shareholders to push for changes.

“[Ubben] is someone certainly we would strongly consider voting for if he were on the ballot for [Bayer’s] supervisory board,” said David Herro, chief investment officer of international equities at Harris Associates, Bayer’s fifth-largest shareholder, according to Bloomberg data.

“Management has not shown a strong propensity to disrupt the status quo,” he added, noting that the company trades at steep discounts to rivals in each of its three business divisions: pharmaceuticals, consumer healthcare and crop science.

Bayer’s share price has never recovered from its Monsanto acquisition, which at the time was the largest all-cash deal ever attempted and the biggest overseas acquisition of a US company. Bayer was quickly engulfed with litigation costs tied to glyphosate, Roundup’s main ingredient.

While shares in the company are down about 50 per cent since the Monsanto deal closed in 2018, there has been some improvement in its stock price recently after it won at least three cases involving Roundup.

“The wins could help remove the perceived legal headwinds that have weighed on the stock’s valuation for several years,” Morningstar said in a November report.

Temasek, the Singaporean sovereign wealth fund and Bayer’s second-largest investor, told business newspaper Handelsblatt last year that “there is still a lot to do” to fix the company.

Bayer has faced off with activists before. Elliott Management built a $1bn stake in the company in 2019, saying there was more value in Bayer’s business divisions than the share price accounted for and pushing for it to quickly settle Roundup litigation.

The same year, Baumann and other key executives lost a crucial vote of confidence at the company’s annual shareholder meeting, with 55.5 per cent of investors voting against ratifying the top management’s actions in a symbolic but non-binding vote.

Ubben led several activist campaigns at his former firm ValueAct, which he left in 2020 to start Inclusive Capital.

The new firm, which focuses on environmental and social impact investing, had a significant stake in electric truckmaker Nikola and Ubben defended the company’s founder Trevor Milton after he was accused of fraud by a short seller, saying he had been “misunderstood”. Milton was convicted of fraud in October.

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