Bayer may put plastics unit on the block: Bloomberg

According to a Bloomberg report, German chemical major Bayer AG is exploring a sale of its $10 billion plastics unit to focus on growing the health business. The German company is considering the options for Bayer Material Science after crosstown chemicals company Evonik Industries AG showed potential interest several months ago, said the report citing people, who asked not to be identified because deliberations are private. No final decision has been made on the plastics unit, and the Evonik considerations failed to gain traction, they said.
 
A sale of the plastics unit, which could fetch more than Euro 7.8 billion ($10.8 billion) including net debt, would take time to carve out and would coincide with a push by Bayer to make acquisitions to broaden its drug and lifescience offering, the people said.
 
Bloomberg report added that Bayer’s plastics unit earns a return that’s lower than the cost of the capital employed, leading to its strategic future within the group to be questioned before. Bayer forecast in March that demand will pick up and the unit will use more of its production capacity, enabling the company to charge higher prices. Bayer aims for Material Science to earn its cost of capital by 2016 at the latest.
 
If the Evonik-Bayer deal culminates, it will one of the biggest deals in the plastics industry in Germany in recent time.