Bayer to Lower Price Range for I.P.O. of Covestro
LONDON — The German drug maker Bayer said on Thursday that it would lower the expected price range for the planned initial public offering of its polymer business, Covestro, amid a volatile period in global stock markets.
Covestro, formerly known as Bayer MaterialScience, had originally hoped to raise 2.5 billion euros, or about $2.8 billion, in its I.P.O. The company is now aiming to raise about €1.5 billion.
Covestro’s shares are now expected to be priced at €21.50 to €24.50 a share. The prior price range was €26.50 to €35.50 a share.
Covestro expects to list its shares on the Frankfurt Stock Exchange on Tuesday. It had originally hoped to list its shares on Friday.
Last year, Bayer, which started as a chemical company in 1863, announced plans to spin off its high-tech polymer business, now known as Covestro, as Bayer shifts its focus primarily to health care. Polymers, or plastics, are used in a variety of industries, including the automotive, electronics and medical fields.
Bayer’s lowering of expectations for the offering follows a global sell-off in stock markets this week over concerns about weakness in commodities and growth worldwide, particularly in the Chinese economy. Markets bounced back on Wednesday but still declined over all in the third quarter.
“Since the start of the bookbuilding phase on Sept. 21, 2015, the capital market situation has deteriorated significantly,” Bayer and Covestro said in a news release.
“External factors such as uncertainty surrounding future economic growth in China or the Federal Reserve’s interest rate policy have contributed to increased market volatility,” the companies added. “In addition, the stock market has been impacted by the negative headlines from the automotive sector.”
The company announced plans for an I.P.O. of Covestro last month.
Bayer said that it would contribute an additional €1 billion to Covestro, keeping its net debt with pension liabilities unchanged at €4 billion.
The offering is expected to consist of up to 69.8 million shares issued by Covestro, or about 33 percent of the company’s shares. Bayer will hold the remaining shares.
The shares are being offered publicly to retail and institutional shareholders in Germany and Luxembourg, as well as in private placements to institutional investors elsewhere.
The material science business was split off as its own division within Bayer in 2004, but it traces its roots to the beginning of the 20th century. One of its scientists, Fritz Hofmann, helped create the first synthetic rubber. Its plastics and coatings are used in passenger and commercial vehicles, in CDs and DVDs, and in the construction industry.
Covestro had sales of €11.7 billion in its 2014 financial year. It employs about 14,200 people.
Deutsche Bank and Morgan Stanley are acting as global coordinators on the offering.« Previous Post Next Post »