Plastics Placement

Bayer Readies Chemicals Unit for Possible €10 Billion Sale

Source: DAPD
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  • Why it matters

    Why it matters

    Bayer is ditching its low-margin plastics production operations to focus on more profitable pharmaceutical and agricultural products.

  • Facts

    Facts

    • Bayer’s plastics operations could be worth as much as €10 billion ($12.9 billion), an analyst said.
    • Bayer’s plastics operations face increased competition from Asian and Arabic rivals, including Saudi Arabian state-backed Sabic.
    • The plastics business’s operating profit was €435 million in 2013, down 25 percent compared to 2012.
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    Audio

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Bayer, the German chemicals and pharmaceutical giant, said Thursday it would spin off and list shares in its plastics operations, which account for a quarter of its sales, in what is likely to be a gradual sale of the subsidiary to investors.

Bayer, which has annual sales of €40.2 billion ($51.8 billion), implied in a statement that it would progressively sell off its plastics business to investors. The company said the listing of shares in the plastic business, which it calls Material Science, would provide it with financial security.

The listing, Bayer said, would “give MaterialScience direct access to capital for its future development.” The business produces coatings and plastics known as polymers, which are ubiquitous components in products ranging from printers, cars and furniture.

Bayer, which has been led by its chief executive, Marijn Dekkers, since 2010, continues to restructure its bulk chemical operations, which is increasingly a commodity business with a volatile cycle and faces competition from lower-cost Chinese and Middle Eastern rivals.

In 2005, Bayer listed another low-margin business, its rubber, plastics and specialty chemicals operations Lanxess, on the Frankfurt Stock Exchange.

The sale of the plastics unit, which saw earnings before interest and taxes fall by 25 percent last year to €435 million, could fetch up to €10 billion, Kepler Chevreux analyst Fabian Wenner told Bloomberg.

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