Bayer Says Covestro Share Sale Successful

02.03.2017 -

German chemical and life sciences major Bayer said it successfully placed a 10.9% stake in engineering plastics producer Covestro with institutional investors on Mar. 1. The limited flotation saw 22 million shares priced at €66.50, change hands. This was 6.4% below the closing price of  €71 on Feb. 28. The sale reduces its shareholding to 53.3% from 64.2%.      

Bayer said allocation of the shares took place on Feb. 28, and ownership will be transferred on Mar 3.  Chief Financial Officer Johannes Dietsch said the sale proceeds will go toward paring down debt. To help finance the planned $66 billion acquisition of US agribusiness giant Monsanto, the group is raising $19 billion in equity capital through the November 2016 issue of €4 billion in mandatory convertible notes.

"The successful placement of a large block of Covestro shares underscores the capital market’s confidence in this still young company," Dietsch said. Stock market experts said the nearly tripling of the plastics producer’s share price since the initial public offering in Q4 2015 reflects the high level of Bayer’s investment in Covestro’s production facilities prior to the separation as well as the strong demand for polyurethane feedstocks that has prompted higher selling prices. 

Bayer said it will continue to consolidate its former sub-groupin its annual earnings statement, but intends to achieve a “full separation” in the coming years. Some observers said Bayer’s pull-back as it prepares for the Monsanto transaction could pave the way for Covestro to enter Germany’s blue-chip DAX index.

The plastics producer, currently listed in the MDAX index of medium-sized companies, improved its adjusted EBITDA by nearly 23% year-on-year in 2016 to €2 billion, as net income more than doubled from €343 million to €795 million.