Bayer floating its plastics business

The German chemical and pharmaceutical multinational giant Bayer is floating its plastics business – Bayer MaterialScience – as a separate company, saying it plans to concentrate on its life science business, i.e. human, animal and plant health.

Bayer, which was founded 151 year ago, has been shifting from chemicals to life science products, which today make up about 70% of its c.€40 billion ($51 billion) in annual revenue.

After selling of its plastics business, the company will be left with crop chemicals, pharmaceuticals and seeds. Bayer, along with Merck, is one of the few remaining drugs plus chemicals conglomerates in Europe.

The divestiture is expected to raise about €10 billion ($12.9 billion) for the company.

In a public communiqué, Bayer AG wrote:

“In this way Bayer would position itself as a world-leading company in the field of human, animal and plant health. The plans remain subject to the approval of the Supervisory Board.”

The company has not yet revealed whether the sale will be through an IPO (initial public offering) or the distribution of shares to stakeholders. These details are likely to be released after the supervisory board meets later today.

Shares in the Leverkusen-based company rose 4.8% to €111.20 this morning, driving up the European Chemicals Index by 1.3%.

Analysts have been speculating for years that Bayer would spin off its plastics business, which earns a return that is inferior to the cost of capital employed. Its health care unit, on the other hand, is doing well, especially after blood thinner Xarelto, eye medication Eylea, and cancer drugs Xofigo and Stivarga gained regulatory approval.

Bayer MaterialScience logo

Bayer expects to raise about €10 billion.

About Bayer MaterialScience

Bayer MaterialScience (BMS) manufactures and develops materials such as sealants, adhesives, coatings, polycarbonates (DVDs, CDs), polyurethanes (insulation for refrigeration appliances, automotive seating), etc.

The main industries served by BMS are electrical engineering and electronics, automotive manufacturing and supply, sports, leisure, home products, and construction.

BMS has about 30 productions plants worldwide. It is divided into three main business units: 1. Polyurethanes. 2. Polycarbonates. 3. Coatings, Adhesives, Specialties.

BMS together with Adidas developed the official FIFA World Cup soccer ball, as well as the EUFA European Nations Cup soccer ball.

In 2013, BMS posted sales of €11.2 billion ($14.42 billion), about 2.2% lower than in 2012.