Study on Bayer Ag and Multi Listed Securities Finance Essay

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The Company Bayer AG was founded on 1st August 1863 by Friedrich Bayer and Johann Friedrich Weskott in Barmen, Germany. Today it is headquartered in Leverkusen, Germany. In order for management purposes Bayer AG was restructured into a holding company in December in the year 2003. All the core businesses were transformed into limited companies which were all managed by Bayer AG. These companies are: Bayer CropScience AG, Bayer HealthCare AG, Bayer Chemicals AG, Bayer MaterialScience AG and the three service companies Bayer Technology Services, Bayer Business Services and Bayer Industry Services. BAYER AG is an international firm with a lot of expertise in the fields of health care, nutritio, etc. The firm’s goods and services are designed and produced in a way to help mankind and benefit and improve their quality of life. In FY 2009, Bayer had a wokforce of 108,400 people and had an output of 31.2 billion.The capital expenditures incurred were A¢”šA1.7 billion and the R&D expenses were 2.7billion. As mentioned earlier, In the year 2009, the Bayer Company had workforce of 108,400 worlwide of which 21,600 were located in Asia-Pacific, other 16,300 employees in North America, and other 16,000 in Latin America,Middle East and Africa and the rest 54,500 in Europe. The Mission statement of Bayer is: “We have set our course for the future”. The Corporate Mission Statement of the organization is the tagline “Bayer: Science For A Life”, which sums up the groups objectives, values and beliefs. OTHER COMPANIES: BAYER CROPSCIENCE is a leading crop science company.Its main area of focus is Crop protection, seeds, pest control, etc. BAYER MATERIALSCIENCE produces high-quality plastic and it also develops remedies and solutions for needs of everyday life. BAYER TECHNOLOGY SERVICES deals in process and plant engineering, construction and optimization. BAYER BUSINESS SERVICES handles the Information Technology infrastructure and technical support factor for countries Canada and USA. BAYER HEALTH CARE is leading in the advanced production of medical products. Its sole mission is to research, develop and produce innovative products that improve the health of people and their quality of life.It has four groups under it: Animal Health Bayer Schering Pharma Consumer Care (over-the-counter medicines and dietary supplements) Medical Care MEANING OF MULTI -LISTED SECURITIES: Multi-listed securities are traded on more than one stock exchange and are suitable for deposit and settlement in more than one Central Securities depository (CSD). These securities can be traded by the customers in the home market, in the international market and in cross-border transactions (i.e between the home market and the remote market). In recent times, many organisations and companies consider listing their shares on multiple stock exchanges in various countries. In today’s global economy this is relatively a safe way to enter and explore the international markets, generate and maintain interest in a multinational company’s shares. ADVANTAGES OF MULTI -LISTING: One of the major advantages that a company can take of multi listing is that it can raise extra capital for the company from another market whenever needed.Multi listing is very easy for companies which have good standing and reputation in the home market as well as foreign market. A company can even raise capital using different instruments like ADR and GDR. Multi listing can also be used to reduce risks.It can be used as a hedging tool (risk management tool). It helps to diversify the security in domestic as well as International market. Having securities listed in multiple countries also has a positive impact on sales and other aspects of the business. It increases the visibility of the company in the market. Listing of shares in multiple stock exchanges also increases the media attention the company receives in each market. In case of an Acquisition, multiple stock exchange listing enables a company to provide acquisition currency. If a company is not performing well in a certain market and has poor liquidity and low profile it can be offset by a better performance in another market. OTHER ADVANTAGES: There are many other advantages a company can take if its shares are listed on multiple stock exchanges.Some important benefits are: It helps in Creating a new market for the company’s shares Increasing the financial standing and reputation of the company. Creating public awareness and public interest in the company and its products. Also providing various opportunities to the company to implement share option schemes for their employees. There are some disadavantages that a company faces when its shares are listed on multiple stock exchanges. DISADVANTAGES: Increasing accountability to public shareholders. It becomes necessary for the company to maintain dividend and profit growth trends. The company is at a risk to an unwelcome takeover. The company also loses its privacy because of the media interest in the Company. It also faces the problem of following the rules and regulations of different governing bodies in different countries. Companies seeking international investments and prospective investors consider multiple listing of their shares but it should be sufficiently compelling to outweigh the burden that comes along multiple stock exchange listings. GENERAL INFORMATION: BAYER, the German Pharmaceutical Compnay, has listed its shares on multiple stock exchanges. It has listed its shares in countries like Germany, Switzerland, France, Spain, Belgium, Luxembourg, UK, Japan and Italy. In 2002 the company also listed its shares on NYSE i.e New York Stock Exchange, which was the eleventh country for the company to list its shares. Currently it has listed its shares in Germany, Switzerland, Spain and UK. ADVANTAGES FOR BAYER IN LISTING IN NYSE AND LONDON STOCK EXCHANGE: One of the major advantages Bayer AG faced by listing its shares on NYSE were that it made it simpler for Bayer to develop and expand in the US market. Wilson, managing director and head of international syndicate at UBS Warburg, said: “Getting greater access to U.S. investors is sometimes given as a reason for a U.S. listing, and it’s a way for smaller companies to improve their profile. However, most significantly, it’s a way to get acquisition currency.” (Rubery, 2002) Bayer Spokesperson, Annette Josten agreed and said, that if Bayer would make an acquisition then the company could pay for it in exchange of shares.She further added that Bayer has no concrete plans but this does give them the opportunity to act quickly upon this.It will also help the company to increase its potential investors and provide transperancy in US and also gives them opportunities to initiate and launch stock option programs for the U.S employees. Multiple listing of stock also helped Bayer to increase liquidity by widening its trade market, and provided it with easier accesss to prospective and potential investors. Also by listing its shares in NYSE and LSE, BAYER got a lot more and better analyst coverage. And their potential investors got better information about the Company.The Company can raise funds whenever needed. The company also experienced High Abnormal Return as the potential customers increased aft the company was listed on NYSE. The company also benefits in the foreign market by any foreign currency fluctutations. DISADVANTAGES OF MULTIPLE LISTING FACED BY BAYER AG: When a company is listed on multiple stock exchange it has to follow foreign ownership restrictions and go by the rules and regulations of the foreign country when one companys investors are not permitted to hold foreign shares.In case of Mergers and Acquisitions dual listing plays a very important role.But Non Mergers and Acquisitions related dual listings have different problems and difficulties to overcome.Josten at Bayer explains, “The challenge was the comprehensive administrative and organizational work in preparation of the listing. But due to very good co-operation with the SEC and the auditors, we managed to complete that work successfully.” Bayer Company being listed on multiple stock exchanges also faces some disadvantages like Increased Cost.The Company needs to comply with different markets which increase pressure on the staff, increased reporting and also increases the operation costs. Every move of the company will be followed by the analysts. And any mistake committed by the company will cost the company huge losses. In multiple stock exchange listings it becomes necessary for a company to produce accounts under two different sets of accounting rules, possibly leading to reporting of different results in different markets. It also is necessary that the domestic investors should have the same set of information as the international investors, therefore the information might be needed to be published in multiple languages to suit domestic investors.This will increase the expenses and compliance work involved.

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