Bayer told analysts of cash call plan a day before official statement

By Ludwig Burger

FRANKFURT (Reuters) -Bayer told several brokerages about plans to seek shareholder permission to issue shares one day before formally announcing the news on Friday, which weighed heavily on the stock, analysts' notes seen by Reuters showed.

The healthcare and agriculture group said in a statement on Friday it would seek shareholder approval at its annual meeting on April 25 potentially to increase shares outstanding by about 35% over the next three years to cover possible costs of U.S. litigation.

Its shares fell by as much as 10% and closed 6.5% lower.

In a note dated Thursday and seen by Reuters, Jefferies analysts told clients about Bayer's plan, citing detailed remarks by Bayer's leadership to a meeting that day of sell-side analysts from several brokerages. Jefferies did not immediately respond to a request for comment.

Two other analysts sent more informal notes, seen by Reuters, to clients on Friday via a messaging system that made clear they learned of the plan at meetings with Bayer on Thursday.

The brokerages did not comment or did not immediately respond to a request for comment on Friday. German financial markets regulator Bafin did not immediately respond to a request for comment.

Bafin requires listed companies to disseminate information with potential to move a share price "to as wide a public as possible on a non-discriminatory basis".

A Bayer spokesperson said that the latest proposal aligns with previous shareholder authorization for a 35% capital increase that was in place until 2019. Bayer also had conditional capital of 10% at its disposal at the time, he added.

The spokesperson pointed to a presentation that Chairman Norbert Winkeljohann gave in January that said the company was considering a vote on raising capital.

In a sign that the market-moving potential of Bayer's move may have been difficult to predict, analysts independently expressed surprise at Friday's share-price slump. Some even said Bayer's move could have been seen as a positive development by working toward resolution of U.S. litigation, which includes lawsuits over the weed killer glyphosate.

"Not saying that it is a positive, but CFO did talk about this being a standard procedure in the sell-side meeting yesterday," one of the analysts' message said, referring to Bayer's plan to seek a vote on raising capital.

Analysts further cited Bayer executives as saying on Thursday that the size of the cash call was not out of the ordinary.

At a January presentation for investors and analysts, Winkeljohann said Bayer was looking into requesting shareholder approval for an unspecified equity capital authorisation at this year's annual general meeting.

The January presentation posted on Bayer's website does not mention the size of any cash call, but says funds would be "used only to resolve major litigation while maintaining balance sheet resilience and safeguarding credit metrics".

In its official statement on Friday, part of an invitation to shareholders to the annual meeting, Bayer said it would only resort to a rights issue "if it is absolutely necessary," and not use it for mergers or acquisitions.

(Reporting by Ludwig Burger; Editing by Cynthia Osterman)