Bayer (Leverkusen / Germany; www.bayer.com) is reducing its stake in engineering plastics producer Covestro (Leverkusen; www.covestro.com) by a further 10.9% to 53.3% with the placement of 22 million shares on the Frankfurt stock exchange. Bayer said allocation of the shares to institutional investors at EUR 66.50 per share took place on 28 February, and ownership will transfer on 3 March.

CFO Johannes Dietsch said the former Covestro parent company will use the proceeds of nearly EUR 1.5 billion to pay down debt. Bayer placed EUR 4 bn in mandatory convertible notes in November 2016 to raise USD 19 bn worth of fresh equity capital to help finance its planned takeover of US agribusiness giant Monsanto for USD 66 bn. For the present, the German group said it will continue to consolidate the former Bayer MaterialScience in its annual earnings statement, but said it intends to achieve a “full separation” in the coming years.

"The successful placement of a large block of Covestro shares underscores the capital market’s confidence in this still young company," Dietsch said. Covestro’s market value has soared since its flotation for EUR 24 per share in October 2015 – see Plasteurope.com of 08.10.2015. Market watchers said the stock was attractive due to several factors, including the high level of Bayer’s investment in plastics production facilities prior to the separation as well as the strong demand for polyurethane feedstocks and their consequently higher selling prices.

Covestro’s stock rose to just over EUR 73 per share prior to Bayer’s announcement that it would reduce its ownership but initially tumbled by 6.5% to EUR 64.50 per share following the placement. Thanks in part to higher capacity utilisation rates at its production facilities, the company's adjusted EBITDA increased by nearly 23% against 2015 to EUR 2 bn, and net income more than doubled year-on-year from EUR 343m to EUR 795m, CEO Patrick Thomas said at the annual press conference on 20 February – see Plasteurope.com of 22.02.2017.