DealBook: Bayer to Spin 0ff Polymer Business in Public Listing

Photo A Bayer plant in Leverkusen, Germany.Credit Ina Fassbender/Reuters

Updated, 8:11 a.m. | LONDON – The German drug maker Bayer said on Thursday that it planned to spin off its polymer business into a new, publicly listed entity as it focuses on its health care and crop protection operations.

The move represents the latest step in Bayer's shift to be primarily a health care company. Bayer started in Germany in 1863 as a chemical company making dyes for the textile industry, but now generates nearly half of its sales from its health care business. Among the company's best-known products is its aspirin.

"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," Marijn Dekkers, the Bayer chief executive said in a news release on Thursday.

Credit Oliver Berg/European Pressphoto Agency

The Wall Street Journal, citing sources, reported on Wednesday that Bayer planned to spin off the unit.

The plan to spin off the polymer business, known as Bayer MaterialScience, was approved by Bayer's management board earlier this month and unanimously approved by its supervisory board on Thursday.

Bayer said it planned to list the material science business as a separate company in the next 12 to 18 months.

"A major reason for this move is to give MaterialScience direct access to capital for its future development," Bayer said. "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 separation also will allow the business to better align its organization and structure for the industries it serves, the company said.

Bayer has been shifting more of its focus and resources to its life science businesses in recent years, which include health care and products to protect and grow better crops. Those businesses accounted for 70 percent of its sales last year.

The health care business alone generated 18.9 billion euros, or about $24.5 billion, in sales in 2013. That business employs 56,000 people, nearly half of its work force.

This year, Bayer agreed to acquire the consumer care business of Merck for $14.2 billion, including the allergy medicine Claritin, the foot care brand Dr. Scholl's and Coppertone sunscreen. The deal makes Bayer one of the largest providers of over-the-counter health care products.

After the spin off, the life sciences businesses will have annual sales of about €29 billion on a pro forma basis and employ nearly 99,000 people, including about 29,500 in Germany. Its headquarters will remain in Leverkusen, Germany.

The material sciences business was split off as its own division within Bayer in 2004, but 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, CDs and DVDs and in the construction industry.

The material sciences business had sales of €11.2 billion in 2013, accounting for about a third of Bayer's sales. After the split, it will employ about 16,800 people worldwide, including about 6,500 in Germany.

The spinoff will be based in Leverkusen and adopt a new name after the separation, Bayer said.

Over all, Bayer posted sales of about €40.2 billion in 2013 and had about 113,200 employees.

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