Bayer AG Will Spin Off Plastics To Focus On Life Sciences
September 18, 2014
By Krystle Vermes, BioSpace.com Breaking News Staff
German-based biopharmaceuticals company Bayer announced today will spin off its plastics unit as the company moves further toward focusin solely on the life sciences market.
The plastics unit is valued at around $10 billion and Bayer’s supervisory board has unanimously approved the plans.
In a statement from Bayer, the company said it is positioning itself as a “world-leading company in the field of human, animal and plant health.”
"Our intention is 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," Chief Executive Marijn Dekkers said.
The Board of Management originally decided to execute the move back on Sept. 2, 2014.
Bayer’s Material Science division posted sales of $14 billion last year, according to Business Insider. The Material Science portion of the company is dedicated to producing polymers and polycarbonates.
More than two thirds of the company's $52 billion of annual revenue currently comes from its life sciences HealthCare and CropScience divisions, which also includes consumer health, agricultural products and animal health.
Bayer’s shares leapt after the news hit the market Thursday, gaining 6.3 percent to a high of $112.50 in early trading Thursday. Analysts, too, were positive about the decision.
"We believe the complex conglomerate structure of Bayer has been a key 'turnoff' to many would-be Bayer investors," said Deutsche Bank analyst Tim Race, who wrote in a note to investors that the new life-science spinoff could enjoy 6 percent growth in coming years.
The Advancement of CropScience
Bayer’s CropScience division is optimistic about development perspectives in the agricultural markets, according to a recent statement from the company, because of growing demand for its chemical and biological crop protection items and high-yielding seeds.
"We are convinced of the long-term growth potential of the agricultural markets despite increasing volatility," said Bayer CropScience CEO Liam Condon. "We expect the worldwide market for agricultural inputs of crop protection products, seeds and traits to grow to around EUR 100 billion by 2020, up from EUR 50 billion in 2008."
Bayer CropScience is also focusing on the research and development of improved wheat varieties, which is considered to be one of the world’s most important crops. The company has teamed up with the research institute, CSIRO, to hone in on key wheat issues.
"We have mapped out a comprehensive 10 year plan to invest EUR 1.5 billion in the research and development of new solutions for wheat through 2020 - encompassing both seeds and crop protection products," said Condon. "Seven wheat breeding stations across the crop's main growing areas around the world are now operating, and the first seeds are to be sold next year in Eastern Europe. Hybrid seed varieties with improved yield are expected after 2020, an example for the long-term nature of our business."