COMMENT
BMS bits soon sailing under different flags?
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If something is repeated often enough it will be taken seriously, Plasteurope.com mused last spring, commenting on reignited rumours that Bayer might cut off its plastics arm, Bayer MaterialScience (BMS). And so in autumn the trial balloon has landed. One of the last titans of the chemicals and plastics industry has announced it will shed its last materials business.
Following stock market logic, Bayer’s move is the right one. CEO Marijn Dekkers needs increasing sums to compete in the big leagues of pharmaceuticals, where fortunes are made (and lost). In early summer, the German group made headlines when it beat powerful competitors to take home a consumer health business for USD 11 bn – a price equal to the annual sales of BMS.
Bayer’s plans for an initial public offering of the plastics business, in particular Dekkers’ statement that an independent BMS would have better access to capital markets and more flexibility to decide on its own investments, do not follow the same logic. Neither are his remarks that the high-profit Life Sciences businesses accounted for 88% of group EBITDA before special items a harbinger of a good deal.
If a materials business devalues a company with assets in life sciences, why would investors regard it as an attractive prospect on its own? The BMS portfolio is more valuable than that of another, still struggling, former Bayer business. But, let’s face it: plastics – no matter how technologically sophisticated – will never command the same multiples as cancer drugs.
Even a manager with the communicative skills of CEO Patrick Thomas presumably would have trouble persuading investors to plunk down triple-digit million sums for a state-of-the-art polyurethanes facility such as the new 300,000 t/y gas-phase TDI plant at Dormagen.
As leader in most of its markets, BMS could not be sold to a competitor. By the same token, a private equity investor, too, would be unable to flog it off in one piece. Under the most likely scenario, the company would be broken up, with polycarbonate, PU feedstocks and coatings sailing under different flags.
Whether this is a good plan or not depends on the observer’s perspective. The breakup of Hoechst and Rhone-Poulenc have already pointed the way, and if the activist shareholders of Dow and DuPont prevail, two more titans soon will be dissolved.
The BMS businesses would at least be in “good company.” A lot of corporate plastics fragments are already floating in that virtual ocean.
Dede Williams
Following stock market logic, Bayer’s move is the right one. CEO Marijn Dekkers needs increasing sums to compete in the big leagues of pharmaceuticals, where fortunes are made (and lost). In early summer, the German group made headlines when it beat powerful competitors to take home a consumer health business for USD 11 bn – a price equal to the annual sales of BMS.
Bayer’s plans for an initial public offering of the plastics business, in particular Dekkers’ statement that an independent BMS would have better access to capital markets and more flexibility to decide on its own investments, do not follow the same logic. Neither are his remarks that the high-profit Life Sciences businesses accounted for 88% of group EBITDA before special items a harbinger of a good deal.
If a materials business devalues a company with assets in life sciences, why would investors regard it as an attractive prospect on its own? The BMS portfolio is more valuable than that of another, still struggling, former Bayer business. But, let’s face it: plastics – no matter how technologically sophisticated – will never command the same multiples as cancer drugs.
Even a manager with the communicative skills of CEO Patrick Thomas presumably would have trouble persuading investors to plunk down triple-digit million sums for a state-of-the-art polyurethanes facility such as the new 300,000 t/y gas-phase TDI plant at Dormagen.
As leader in most of its markets, BMS could not be sold to a competitor. By the same token, a private equity investor, too, would be unable to flog it off in one piece. Under the most likely scenario, the company would be broken up, with polycarbonate, PU feedstocks and coatings sailing under different flags.
Whether this is a good plan or not depends on the observer’s perspective. The breakup of Hoechst and Rhone-Poulenc have already pointed the way, and if the activist shareholders of Dow and DuPont prevail, two more titans soon will be dissolved.
The BMS businesses would at least be in “good company.” A lot of corporate plastics fragments are already floating in that virtual ocean.
Dede Williams
26.09.2014 Plasteurope.com [229370-0]
Published on 26.09.2014