In a major departure from its history, Bayer AG plans to spin off its chemical business and part of its polymers business as a separate, publicly held company by early 2005.
The move will split Bayer's ABS, nylon and polybutylene terephthalate businesses, which will be included in the new company, from polycarbonate and polyurethane, which Bayer will keep.
Leverkusen, Germany-based Bayer will focus on products for the health-care, nutrition and life science markets. The new polymers/chemicals company - tentatively called NewCo - will have annual sales of about 5.6 billion euros ($6.4 billion) and will employ about 20,000 worldwide.
That sales total includes about 3.3 billion euros ($3.8 billion) from the entire chemicals business and 2.3 billion euros ($2.6 billion) from polymers - about one-fourth of total polymers sales.
NewCo's products are to include ABS, solid rubber and additives and pigments used in making plastic-based compounds and concentrates. In a Nov. 7 news release announcing the move, Bayer officials said the new firm will rank among Europe's leading chemicals suppliers and will hold leadership positions in more than two-thirds of global market segments.
``Independence will trigger strong entrepreneurial impulses, enabling NewCo to enhance the competitiveness of its production technology ... and generate above-average growth and value,'' Bayer Chief Executive Officer Werner Wenning said in the news release.
Bayer veteran Axel Claus Heitmann has been designated as CEO of the new firm. Heitmann, 44, joined Bayer in 1989 and currently heads the Asia-Pacific region for Bayer's polymers unit. NewCo is expected to be headquartered in Germany, but an exact location has yet to be decided.
In total, Bayer's polymers and chemicals units posted first-half sales of about 6.7 billion euros ($7.6 billion), representing more than 46 percent of Bayer's overall sales. But polymers sales were down more than 5 percent vs. 2002, and chemicals sales were down more than 25 percent in the same comparison, as the firm has struggled with a soft global economy.
Bayer also has been hurt by pending litigation connected to its Baycol/Lipobay cholesterol drug, which was linked to more than 30 deaths worldwide through the end of 2002. At that point, 5,700 Baycol/Lipobay-related lawsuits had been filed against Bayer, almost all in the United States.
Late last year, that financial situation led Bayer to announce 15,000 job cuts, 5,000 of which would come from its polymers unit. Bayer cut 1,000 polymers jobs in Belgium, Brazil and Canada in the first half of 2003.
The Nov. 7 release said Bayer's PC and PU businesses - as well as TPU film maker Wolff Walsrode AG - will not be included in NewCo. A Bayer spokesman said the firm's Bayblend-brand PC/ABS alloy also will be excluded. Leaving those units out will prevent Bayer from pushing further downstream into semifinished automotive products such as door trim and automotive skins, according to industry analyst Robert Eller.
``Bayer would be losing some synergies by leaving polycarbonate and polyurethane out of the equation,'' said Eller, president of Robert Eller Associates in Akron, Ohio.
Industry analyst Austin Peppin, president of Peppin & Associates in Chesterfield, Mo., said he is not surprised that Bayer plans to include ABS in NewCo. Bayer has a long ABS history in Europe and entered the North American market by buying Monsanto Inc.'s ABS business in 1995.
``Nobody's really been happy with ABS,'' Peppin said. ``It's a good material, but it's faced a tremendous amount of competition over the last 20 years. The only real growth [ABS] has seen has been in Asia.''
Peppin added that Bayer does not hold a significant market share in nylon or PBT, which may be why those materials are being included in the new company.