MOSCOW (MRC) -- Bayer AG moved a step closer to floating its EUR11 billion (USD12.3 billion) specialty chemicals business by "legally and economically" separating the unit, now named Covestro AG, said the Wall Street Journal.
The German pharmaceuticals group plans to float Covestro, previously called Material Science, by the middle of next year and potentially as soon as this fall. Bayer plans either an initial public offering or direct spinoff to shareholders. The company has previously indicated that it preferred an IPO, which would generate cash for heavily indebted Bayer.
Bayer’s commodity chemicals business, which primarily produces polyurethanes and polycarbonates used in products ranging from Mercedes-Benz door handles to an airplane hangar at Frankfurt Airport, has long been a "cash machine" for the Bayer group, but is also a high-growth business, Covestro Chief Executive Patrick Thomas said in an interview ahead of the separation.
Volume in the global polyurethanes and polycarbonate market increased by an average growth rate of 7% between 1976 and 2014, Mr. Thomas noted, and to maintain that tempo Covestro will "have to keep investing capital if it wants to keep growing." That “growth potential” makes the business "very attractive from a shareholder’s perspective," he added.
But for Bayer, which has in recent years focused on its core Health Care business and its lucrative pharmaceutical drug pipeline, the capital investment became too burdensome.
As MRC informed earlier, the plan for Bayer MaterialScience to become a separate company was announced in September 2014.
Bayer is a global enterprise with core competencies in the fields of health care, agriculture and high-tech polymer materials. As an innovation company, it sets trends in research-intensive areas. Bayer's products and services are designed to benefit people and improve their quality of life. At the same time, the Group aims to create value through innovation, growth and high earning power. Bayer is committed to the principles of sustainable development and to its social and ethical responsibilities as a corporate citizen. In fiscal 2014, the Group employed 118,900 people and had sales of EUR 42.2 billion.