Bayer Cuts Last Ties With Covestro

As it moves closer to closing its more than $60 billion takeover of US rival Monsanto, the Bayer group has initiated the full separation from Covestro, selling a 14.2% stake in its former engineering plastics subsidiary through an accelerated bookbuilding process.

Bayer launched the placement of some 29 million shares with target proceeds of around €2.2 billion on May 3 after the close of trading on European stock exchanges. Like previous Covestro flotations, this one is aimed exclusively at institutional investors. BofA Merrill Lynch and J.P. Morgan are acting as joint bookrunners.                      

Following this latest transaction, Bayer will hold just under 7% of the former Bayer MaterialScience and repay the exchangeable bond issued in 2017 that matures in 2020. The trust will no longer hold any Covestro shares after the purchase.

According to the news agency Bloomberg, Covestro’s share price, which climbed 32% last year, has fallen by 11% on average this year on fears that the market boom for polyurethane and polycarbonate may be peaking.

At its annual results presentation, Bayer cut its forecast for full year 2018, slightly, saying it now expects adjusted EBITDA to decline by a low single-digit percentage to less than €3 billion rather than coming being in line with the 2017 figure as previously forecast.

At the same time, CEO Werner Baumann said he is “very confident” that the Monsanto deal will receive US approval soon.