After carving out its engineering plastics sub-group Bayer MaterialScience as Covestro on Sept. 1, Bayer is wasting no time pushing the fledgling company to stand on its own feet.

Confirming analyst speculation, the Leverkusen chemical producer that strives to be a purely life science player has announced it will seek a listing for Covestro in the regulated market segment (Prime Standard) of the Frankfurt Stock Exchange in the fourth quarter of this year.

The initial public offering will consist solely of new shares issued by Covestro through a capital increase. Shares will be offered publicly to private and institutional investors in Germany and Luxembourg and in private placements elsewhere. Depending on capital market conditions, the ipo is expected to be completed by the end of the quarter.

Covestro will use the proceeds primarily to repay intercompany debt to Bayer and thus establish its target capital structure. With net debt including pension liabilities at 2.5 to 3 times adjusted EBITDA in 2015, the new company will seek an investment-grade credit rating.

Marijn Dekkers, CEO of Bayer, said the German group believes an ipo will deliver “clear benefits for both Bayer and Covestro and their stakeholders, and former BMS chief Patrick Thomas, now CEO of Covestro, expressed confidence that the transaction will attract investors to a “market-leading, focused business.”

Bayer was widely expected to seize a positive moment to float its plastics business. After weakness in 2013 and improving results in 2014, the new company is targeting mid-term growth in net sales and adjusted EBITDA. As BMS, it reported 2014 sales of €11.8 billion and adjusted EBITDA of just under €1.2 billion, yielding an EBITDA margin of 14.6%, up 3.5 percentage points year-on-year. In the first half of 2015, sales rose 9.5% to almost €6.3 billion, with adjusted EBITDA up 46% to €914 million.

The financial outlook for the plastics specialist is driven by expectations of increased utilization of the company’s asset base and a disciplined cost focus, the executives said. Demand growth is seen as leading to higher utilization of recently expanded capacities, in particular the new TDI plant at Dormagen, Germany.

The recently installed new capacities also should reduce the need for new asset investment at Covestro, thus supporting growth in free cash, Bayer said, adding that the company plans to align overall costs with best-in-class chemical industry benchmarks. Together with “targeted asset optimization,” this is expected to generate total gross savings of around €420 million by 2019.

From 2016 onward, Covestro envisages a dividend policy with a payout ratio of 30-50% based on net income.