MOSCOW (MRC) -- Bayer's plastics maker Covestro aims to raise about 2.5 billion euros (USD2.8 billion) with an initial public offering in the fourth quarter, sources said, leaving its parent to focus on drugs and pesticides, said Reuters.
Bayer unveiled plans last year to split off the business, formerly known as Bayer MaterialScience, in a move which has improved its share valuation by removing the discount typically applied to diversified companies.
In an "intention to float" notification released on Friday, Bayer said its Covestro offer would consist only of new shares and the proceeds would be used mainly to repay loans to Bayer.
Several people familiar with the plans said Bayer was telling investors to expect a share volume worth about 2.5 billion euros, or a quarter of Covestro's targeted equity value of 10 billion euros or more.
A spokesman for Bayer, whose stock was down 2.4 percent, declined to comment on the volume.
The sources said the exact figures for the flotation of Europe's fourth-largest chemicals maker would depend on future market conditions.
If confirmed, it would be the biggest listing in Germany since Deutsche Post went public in a 6.25 billion euro transaction in November 2000. A more recent flotation of comparable size was Tognum in 2007, worth 2 billion euros.
Selling new Covestro shares to redeem loans from Bayer, instead of having the parent company sell Covestro shares directly to the market, gives Bayer more flexibility to adjust how many shares it sells, depending on stock market conditions, closer to the flotation, finance chief Johannes Dietsch said.
The parent company will commit to holding onto its Covestro shares for 180 days after the listing, he said.
As MRC imformed earlier, from September 1, 2015, Bayer MaterialScience became known as Covestro. Bayer aims to float this business on the stock market by mid-2016 at the latest. The plans for the carve-out of Bayer MaterialScience were 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.