Sources: Bayer eyeing sale of plastics business to expand in health care
Bayer AG, Europe's biggest pharmaceutical and chemicals company, is exploring a sale of its $10 billion plastics unit to focus on expanding the health business, according to people with knowledge of the matter.
The North American headquarters for the business unit, Bayer MaterialScience, is based in Robinson. Bayer employs 2,200 people in the Pittsburgh region in several divisions, including MaterialScience, the former Medrad radiology equipment unit, and corporate functions such as information technology and business services.
The company said it is selling its radiology business building in Warrendale for $26 million but declined to say why or what will happen to employees. In an email, the company said the decision “does not change Bayer's strong presence in Pittsburgh.”
The three-story office building was constructed for the radiology business in 2007. In addition to the Warrendale office, Bayer has radiology business offices in Saxonburg, Indianola and O'Hara.
Health care accounts for about 45 percent of Bayer's revenue. MaterialScience and Bayer's agriculture business, CropScience, each contribute about 27 percent.
The German company is considering options for MaterialScience because crosstown chemicals company Evonik Industries AG showed potential interest several months ago, said the sources, who asked not to be identified because deliberations are private.
A final decision has not been made on the plastics unit, and the Evonik considerations failed to gain traction, they said.
A sale of the plastics unit would take time to carve out and would coincide with a push by Bayer to make acquisitions to broaden its drug and life-science offering, the people said. The business may fetch more than $10.8 billion, including net debt, according to estimates from Fabian Wenner, an analyst with Kepler Cheuvreux in Zurich.
Now would be a good time for Bayer to act, said Odile Rundquist, a Geneva-based analyst for Helvea SA. Rising capacity use and dropping raw materials prices at the unit helped push first-quarter earnings above analyst estimates on Monday.
Bayer's net profit in the first quarter climbed 23 percent to $2 billion as revenue rose 2.8 percent to $14.5 billion. The company's North American business generated revenue of $3.7 billion, down 2.7 percent from the same quarter last year.
“I think it would be a very good time, because now they are really getting some critical mass in pharma,” Rundquist said. “I think if they were to buy something else in health care, it would be a good move.”
The health care industry is producing a flurry of deals, and Bayer's mergers and acquisitions team is focused on pursuing the company's chosen targets in that area. Bayer is bidding for Merck & Co.'s over-the-counter medicines business, people familiar with the matter said in March, and CEO Marijn Dekkers has said he's interested in buying animal-health assets.
Dekkers is looking for acquisitions because he wants the company's units to remain leaders in their markets. That's a strategy driving deals in the industry.
Bayer may target Zoetis Inc., the American animal-health company spun off from Pfizer Inc. last year, said Andrew Baum, a London-based analyst for Citigroup. Questioning whether Bayer is destined to remain “forever the bridesmaid” as its peers reshuffle portfolios, Baum wrote that the company's market share diminished relative to its competitors.
Barbara Mueller, a spokeswoman for Evonik, and Guenter Forneck, a spokesman for Bayer, declined to comment.
Evonik is ready to make acquisitions “if they fit,” Chief Financial Officer Ute Wolf said this month, adding that the acquisition of larger companies is possible.
The acquisition of Bayer MaterialScience would be sizable for Evonik. The company's market capitalization fell 14 percent since it listed shares sold to institutional investors a year ago.
Trib Total Media staff writer Alex Nixon contributed to this report.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- EPA hearings to bring coal debate to Pittsburgh streets
- Hiring in shale industry shifts to engineering, construction workers
- Consol Energy posts $25 million loss despite gas gains
- Hotels, restaurants lead job additions in Pittsburgh region
- Construction of $500M power plant in South Huntingdon stalled