Management Report & Annexes | Report on Future Perspectives and on Opportunities and Risks

21. Takeover-Relevant Information

Explanatory report pursuant to Sections 289 Paragraph 4 and 315 Paragraph 4 of the German ­Commercial Code (HGB)

The capital stock of Bayer AG amounted as of December 31, 2013 to €2,117 million, divided into 826,947,808 no-par bearer shares. The capital stock and the number of shares were thus unchanged from the end of the previous year. Each share confers one voting right.

A small number of shares may be subject to temporary trading restrictions, such as retention periods, in connection with employee stock participation programs.

We received no notifications in 2013 of direct or indirect holdings of shares in Bayer AG that exceed 10% of the capital stock. The company thus is not in possession of any notifications of holdings that ­exceed 10% of the capital stock.

Pursuant to Section 84, Paragraph 1 of the German Stock Corporation Act (AktG), the members of the Board of Management are appointed and dismissed by the Supervisory Board. Since Bayer AG falls within the scope of the German Codetermination Act, the appointment or dismissal of members of the Board of Management requires a majority of two thirds of the votes of the members of the Supervisory Board on the first ballot. If no such majority is achieved, the appointment may be approved pursuant to Section 31, Paragraph 3 of the Codetermination Act on a second ballot by a simple majority of the votes of the members of the Supervisory Board. If the required majority still is not achieved, a third ballot is held. Here again, a simple majority of the votes suffices, but in this ballot the Chairman of the Supervisory Board has two votes pursuant to Section 31, Paragraph 4 of the Codetermination Act. Under Section 6, Paragraph 1 of the Articles of Incorporation of Bayer AG, the Board of Management must comprise at least two members. The Supervisory Board may appoint one member to be Chairman of the Board of Management pursuant to Section 84, Paragraph 2 of the German Stock Corporation Act or Section 6, Paragraph 1 of the Articles of Incorporation.

Under Section 179, Paragraph 1 of the German Stock Corporation Act, amendments to the Articles of ­Incorporation require a resolution of the Stockholders’ Meeting. Pursuant to Section 179, Paragraph 2 of the German Stock Corporation Act, this resolution must be passed by a majority of three quarters of the voting capital represented at the meeting, unless the Articles of Incorporation provide for a different ­majority. However, where an amendment relates to a change in the object of the company, the Articles of Incorporation may only specify a larger majority. Section 17, Paragraph 2 of the Articles of Incorporation of Bayer AG utilizes the scope for deviation pursuant to Section 179, Paragraph 2 of the German Stock Corporation Act and provides that resolutions may be passed by a simple majority of the votes or, where a capital majority is required, by a simple majority of the capital.

Provisions of the Articles of Incorporation concerning Authorized Capital I and Authorized Capital II are entered in the commercial register of Bayer AG. With the approval of the Supervisory Board and until April 29, 2015, the Board of Management may use the Authorized Capital I to increase the capital stock by up to a total of €530 million. New shares may be issued against cash contributions and/or contributions in kind, but capital increases against contributions in kind may not exceed a total of €423 million. If the Authorized Capital I is used to issue shares in return for cash contributions, stockholders must ­normally be granted subscription rights. The Board of Management may only exclude stockholders’ ­subscription rights to shares issued out of the Authorized Capital I that do not represent more than 20% of the existing capital stock. Absent a further resolution on the exclusion of stockholders’ subscription rights, the Board of Management also may only exclude stockholders’ subscription rights to shares issued under other authorizations regarding capital measures (Authorized Capital II, bonds with warrants or convertible bonds, purchase and sale of own shares) provided that such shares do not in total represent more than 20% of the existing capital stock.

With the approval of the Supervisory Board and until April 29, 2015, the Board of Management is also authorized to increase the capital by up to €212 million in one or more installments by issuing shares out of the Authorized Capital II in exchange for cash contributions. The stockholders must normally be granted subscription rights. However, the Board of Management is authorized, with the approval of the Supervisory Board, to exclude subscription rights for stockholders provided the capital increase out of the Authorized Capital II does not exceed 10% of the capital stock existing at the time this authorization becomes effective or the time this authorization is exercised and the issue price of the new shares is not significantly below the market price of the already listed shares.

Conditional capital of €212 million exists in connection with an authorization – valid through April 29, 2015 – to issue bonds with warrants or convertible bonds, profit-sharing rights or profit participation bonds (collectively referred to as “bonds”) with a total face value of €6 billion. The Board of Management may, with the consent of the Supervisory Board and under certain conditions, exclude the bond subscription rights that would otherwise be granted to stockholders. One of the conditions is that the total amount of the shares required to service the bonds does not exceed 10% of the capital stock. Any other shares issued without granting subscription rights to the stockholders in direct or analogous application of Section 186, Paragraph 3, Sentence 4 of the German Stock Corporation Act shall be credited against this 10% limit. Further, the 2010 Annual Stockholders’ Meeting authorized the Board of Management to purchase and sell company shares representing up to 10% of the capital stock. This authorization also expires on April 29, 2015.

A material agreement that is subject to the condition precedent of a change of control pertains to the undrawn €3.5 billion syndicated credit facility arranged by Bayer AG and its U.S. subsidiary Bayer Corporation. This facility is available until December 2018 and can be extended to run for up to two further one-year periods. The participating banks are entitled to terminate the credit facility in the event of a change of control at Bayer and demand repayment of any loans that may have been granted under this facility up to that time.

In addition, the terms of the €2.4 billion (as of December 31, 2013) in notes issued by Bayer in the years 2006 to 2013 under its multi-currency European Medium Term Notes program also contain a change-of-control clause. Holders of these notes have the right to demand the redemption of their notes by Bayer AG in the event of a change of control if Bayer AG’s credit rating is downgraded within 120 days after such change of control becomes effective.

Agreements exist for the members of the Board of Management in compliance with Section 4.2.3 of the German Corporate Governance Code to cover the eventuality of a takeover offer being made for ­Bayer AG. Under these agreements, payments promised in the event of early termination of the service contract of a Board of Management member due to a change of control are limited to the value of three years’ compensation and may not compensate more than the remaining term of the contract.

Last updated: February 28, 2014  Copyright © Bayer AG
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