Bayer's Spinoff Covestro to Go Public in Fourth Quarter
Published: Sep 04, 2015
September 4, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Germany-based Bayer AG announced today it plans an initial public offering (IPO) of its recently renamed MaterialScience plastic unit. The unit’s new name is Covestro.
In February, the company indicated it would restructure, unloading its MaterialScience unit so its remaining units, HealthCare and CropScience, would be better focused on life sciences. “We will be a pure life sciences company and must organize ourselves as such,” said Guenter Forneck, a Bayer spokesman in a statement at the time.
The MaterialScience unit had a value of approximately $11.7 billion.
The overall strategic plan, as outlined at its Annual Stockholders’ Meeting in Cologne, Germany in May, involved driving organic growth of HealthCare and CropScience, integrating Merck & Co. ’s consumer care business in the U.S. and Dihon Pharmaceutical in China, and demerge MaterialScience and align its life science businesses.
The IPO for Covestro is designed to raise 2.5 billion euros in new capital, and will only offer new shares. The proceeds are expected to be used to repay loans to Bayer. It will be listed with the Frankfurt stock exchange and is expected to take place in the this year’s fourth quarter. Covestro plans to seek an investment-grade credit rating. The company is large enough to then become a member of Germany’s benchmark DAX index, although the company’s chief financial officer, Johannes Dietsch, told journalists in a conference call that Bayer expects to hold a majority stake.
The company also plans to make a dividend payout ratio of 30 to 50 percent of net income.
“An IPO delivers clear benefits for both Bayer and Covestro and their stakeholders,” Marijn Dekkers, Bayer chief executive officer said in the call. “This transaction will allow both businesses to pursue their strategic goals.”
The company indicated that it wasn’t particularly concerned about the problems with the current China market. China is responsible for about 15 percent of the company’s sales, but it is spread over a number of industries.
In the long term, Dietsch reported, Bayer plans to sell off its entire stake in Covestro, but it has agreed it won’t sell any additional shares for 180 days. “To me, long term means not after 2020,” Dietsch said at the conference call. “It will probably be after that. But to reiterate, there are no plans for the second part yet. We are focusing on the primary listing first.”
Bayer announced the new name on Sept. 1. “Independence will enable us to bring our strengths to bear in global competition more quickly, effectively and flexibly,” said Patrick Thomas, Covestro chief executive officer in a statement.
Covestro has a four-member board of management. Including Thomas, there is Frank Lutz, the finance and labor director, Klaus Schaefer, for production and technology, and Markus Steilemann, for innovation. The company has 30 production sites worldwide and employed about 14,200 people at the end of 2014. The company supplies various industries worldwide, such as automotive, construction and electronics. It produces the raw materials for polyurethane foam, high-performance polycarbonates and specialty chemicals.