Bayer MaterialScience to be floated off

(Plastics & Rubber Weekly Report)

Leverkusen, Germany – Bayer, the chemicals giant, confirmed that it planned to float off its MaterialScience plastics division as a separate company by mid-2016 and focus on being a Life Sciences business.

Earlier unconfirmed reports had suggested a decision would be made today in what has been one of the sector’s worst-kept secrets for several months.

In an initial statement Bayer said: “The board of management of Bayer AG plans to focus the Bayer Group entirely on the Life Science businesses – HealthCare and CropScience – and float MaterialScience on the stock market as a separate company.

“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 statement added that this decision had been made on 2 September.

It added: “The supervisory board of Bayer AG will discuss the plans at its meeting today, Thursday.

“It is planned to release further information when the supervisory board has reached its decision.”

The group followed up its first announcement with a second in which it said it was planning to float the MaterialScience business on the stock market as a separate company with a new name and identity within the next 12 to 18 months. It did not indicate on which stock markets the new entity might eventually be listed.

“A major reason for this move is to give MaterialScience direct access to capital for its future development. This access can no longer be adequately ensured within the Bayer group due to the substantial investment needs of the Life Science businesses for both organic and external growth," it said.

BMS contributed nearly 28% of Bayer's total €40.2bn (£32bn) sales last year, but only 8.8% of its €435m (£346m) earnings before interest and tax.

Bayer boss Dr. Marijn Dekkers said the intention of the flotation was to create two top global corporations: “Bayer as a world-class innovation company in the Life Science businesses, and MaterialScience as a leading player in polymers.”

Dekkers said both companies had “excellent prospects for success” in their respective industries. Employment levels were expected to remain stable over the next few years, both globally and in Germany.

“We firmly believe that MaterialScience will use its separate status to deploy its existing strength even more rapidly, effectively and flexibly in the global competitive arena,” as well as enabling it direct access to capital markets, he added.

As a separate company, MaterialScience could align its organisational and process structures and corporate culture entirely toward its own industrial environment and business model, the group said.

Various reports have suggested price tags of between €7.5bn (£6bn) and, most recently, €8bn (£6.4bn) for the business, had it been sold outright.

Commenting on how the float would affect Bayer’s UK operations, the group's UK/Ireland chief executive Alexander Moscho said: “Separating it from Bayer and making it an independent company will give MaterialScience more flexibility to develop its portfolio as well as independent access to capital to appropriately fund further business development.

“Longer term, with a stronger focus on Life Sciences, Bayer will benefit from being able to make even greater future investments in R&D, capital expenditure as well as bolt-on acquisitions.”

Moscho said he was “looking forward to seeking further opportunities to partner with centres of innovation and take advantage of the presence of leading academic institutions in the UK which is home to two of the world’s top 10 universities”.

BMS’ UK/Ireland operation turned over €265m (£211m) in 2013, employing 10 staff at its elastomers business in Cheshire.

Related article – Opinion: Bayer MaterialScience wins independence