By Heide Oberhauser-Aslan
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 EUR2
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.
Natalia Drozdiak contributed to this article.
Write to Heide Oberhauser-Aslan at heide.oberhauser@wsj.com
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