Bayer AG share price up, plans to float plastics unit MaterialScience

Bayer AG revealed in an official statement today that it intends to divest its plastics division. The long-awaited step will quicken the German companys retreat from the chemicals industry in order to narrow its focus on the more attractive life sciences operations.

“In this way Bayer would position itself as a world-leading company in the field of human, animal and plant health,” Bayer said in a statement, which was cited by the Wall Street Journal. As reported by Bloomberg, the German company also revealed that it intends to list its plastics business on the stock market as a separate entity.

The plastics division, called MaterialScience, currently produces, among other products, polycarbonate plastics used in luxury cars panoramic roofs and in blu-ray disks. The company reported that the units 2013 sales declined by 2% to €11.2 billion ($14.4 billion), while its earnings before interest and tax plunged by 25% to €435 million.

The company also shared that the management boards spin-off decision must get approval by the supervisory board, which has a meeting scheduled for later today. If the spin-off is approved, it will leave Bayer with divisions focused on pharmaceuticals and crop chemicals and seeds.

The company has been slowly exiting the chemicals industry, after spending 151 years in the business, to focus on more prosperous units. Ten years ago Bayer left behind large parts of its chemicals portfolio after spinning off its Lanxess AG unit.

One of Bayers spokesmen – Mr. Guenter Forneck said in a telephone interview that the company is to release more details on the spin-off plans after the Supervisory Board meets and refused to make any further comments on the matter.

Bayer AG added 4.85% to trade at €111.30 per share at 8:55 GMT in Frankfurt, marking a one year change of +30.60%. The company is valued at €87.78 billion. According to the Financial Times, the 26 analysts offering 12-month price targets for Bayer AG have a median target of €113.50, with a high estimate of €130.00 and a low estimate of €81.00. The median estimate represents a 6.92% increase from the previous close of €106.15.