Germany’s Bayer to float MaterialScience unit as separate firm

(adds comment from company, CEO throughout)

LONDON (ICIS)–Germany-based producer Bayer on Thursday announced plans to float its MaterialScience (BMS) division on the stock market as a separate company in an effort to focus the group entirely on its Life Sciences businesses, consisting of its HealthCare and CropScience units.

The company said by doing this it would position itself as a world-leading company in the field of human, animal and plant health. 

Following the flotation, MaterialScience, headquartered in Leverkusen, would have a new name and a separate identity, Bayer said, adding the new entity would become Europe’s fourth-largest chemical company, with a personnel of around 16,800, including 6,500 in Germany.

“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,” said Bayer’s CEO Marijn Dekkers.

He added that despite the spin off of MaterialScience, employment levels “are expected to remain stable over the next few years, both globally and in Germany.” Bayer’s supervisory board unanimously approved the board of management’s plans announced earlier on Thursday.

Bayer said it plans to float the MaterialScience business on the stock market as a separate company within the next 12 to 18 months. However, it did not clarify if the flotation will be made as an initial public offering (IPO) or just as a spin off part of Bayer, in which case current shareholders would get shares from the new entity, but without any fee involved.

Earlier on Thursday, analysts valued the MaterialScience business at around €8bn.

“A major reason for this move [the flotation] 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,” the company said.

“Also, as a separate company, MaterialScience can align its organisational and process structures and corporate culture entirely toward its own industrial environment and business model,” it added.

Dekkers said the a separate MaterialScience business would be more flexible in the face of global competition.

“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,” he said.

“A strategy and corporate culture aligned to technological and cost leadership, coupled with the ability to make its own investment and portfolio decisions, would give MaterialScience the best development prospects in a highly competitive market,” he added.

Bayer said the companies of its future group had pro forma sales of around €29bn in 2013, employing nearly 99,000 people. The Life Sciences business unit already accounts for about 70% of Bayer’s sales and 88% of earnings before interest, taxes, depreciation and amortisation (EBITDA) before special items.

“Bayer will continue as an enterprise with an attractive and balanced portfolio and a primary focus on organic growth,” Dekkers said.

“To this end, the company intends to raise its research and development spending, selectively strengthen early research at the interface between HealthCare and CropScience, and continue driving the successful commercialization of the recently launched pharmaceutical products,” he added.

Additional information by Nurluqman Suratman