The Urethane Blog

BMS Mulls IPO or Spinoff Options

Bayer Executive Says Spinoff Will Give Plastics Unit Flexibility

Company still looking into options of an IPO or a spin off directly to shareholders Bayer


Heide Oberhauser-Aslan

April 21, 2015 3:12 p.m. ET

FRANKFURT—Bayer AG’s spinoff of its plastics division will bring down the unit’s costs by providing it more flexibility, mitigating the need to push through major investments once it is an independent entity, the division’s financial chief told The Wall Street Journal.

Bayer executives have previously said the Material Science business, which the German conglomerate in September announced plans to float, requires big capital investments to stay competitive.

Bayer wants to divest itself from the plastics unit, roughly valued at $10 billion, to allow the company to focus on its faster growing, more profitable health care and crop-sciences businesses.

“We’re coming from a very large company and in the future we’ll be much smaller, so we’ll be able to streamline processes and be more flexible…that will contribute to reducing costs,” Bayer Material Science CFO Frank Lutz said in an interview.

Bayer’s Material Sciences has invested a total of 1.5 billion euros ($1.6 billion) in Germany since 2001 and more than €2 billion in China in recent years. Mr. Lutz said the unit would likely focus only on maintenance investments in the coming years, as opposed to expanding capacity.

“The investment needs won’t be so big for us, since we’ve already invested an extreme amount in recent years,” Mr. Lutz added.

The plastics unit executive said overall there is still around 20% overcapacity in the market for some of its products, but that the business is seeing demand grow.

The company still plans to list its plastics business on the stock exchange by mid-2016 at the latest, said Mr. Lutz, adding it could come as soon as this fall or in the first half of 2016. Bayer aims to give the unit its economic and legal independence by September 1, he said.

Mr. Lutz also said the company was still looking into both options of an initial public offering or a spin off directly to shareholders.