Bayer Gives Green Light to Covestro IPO -- 2nd Update
September 04 2015 - 9:43AM
Dow Jones News
By Neetha Mahadevan and Natascha Divac
FRANKFURT--Bayer AG (BAYN.XE) on Friday said it will proceed
with an initial public offering of stock in its plastics division
Covestro AG, formerly known as Bayer MaterialScience.
Covestro will seek a listing in the Frankfurt Stock Exchange,
Bayer said, but declined to comment on the targeted emission
volume.
But people familiar with the matter said Covestro will aim to
sell new shares worth around 2.5 billion euros ($2.8 billion),
giving the company a valuation of at least EUR11 billion, including
debt.
The proceeds from the IPO have been partially earmarked to repay
over EUR3 billion in financing lines that Covestro owes Bayer.
Since the announcement of Bayer's plans to separate the unit
last year, the pharmaceutical company has been gradually stepping
closer to floating its 11 billion euros ($12.3 billion) specialty
chemicals business.
The IPO offering will consist solely of new shares issued
through a capital increase. The company expects the IPO to be
completed in the fourth quarter this year.
Covestro intends to use the proceeds from the IPO primarily to
repay debt owed to Bayer.
The drug maker said rating agencies have signaled that
Covestro's IPO will be rating positive for Bayer.
Bayer still wants to keep a majority stake in Covestro after the
IPO, but plans to reduce its stake to zero in the long-term, Bayer
Chief Financial Officer Johannes Dietsch said, hinting this would
happen before 2020.
Covestro said it is aiming for mid-term growth of its sales and
adjusted earnings before interest, taxes, depreciation and
amortization. The company generated net sales of EUR11.76 billion
and adjusted EBITDA of EUR1.16 billion in fiscal 2014.
Covestro said it is aiming for a dividend payout ratio of 30% to
50% based on net income from 2016 onwards.
"Our efficient capital structure and strong free cash flow are
expected to support a sustainable dividend policy," said Patrick
Thomas, CEO of Covestro.
For fiscal 2015, Covestro has proposed a total dividend payment
of EUR100 million to EUR150 million at the Annual Stockholders'
Meeting in 2016, provided that the IPO is successfully executed in
the fourth quarter of 2015.
Write to Neetha Mahadevan at neetha.mahadevan@wsj.com and
Natascha Divac at natascha.divac@wsj.com
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(END) Dow Jones Newswires
September 04, 2015 10:28 ET (14:28 GMT)
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