Covestro shares drop after Bayer sells 10.9% stake
Tom Brown
01-Mar-2017
LONDON
(ICIS)–Shares in Covestro slumped on Wednesday after former
owner Bayer sold off a stake in the Germany-headquartered
chemicals producer worth almost €1.5bn.
Bayer, which spun Covestro out into a listed independent
company in October 2015, placed 22m shares in the business
with institutional investors at €66.50 per share,
representing a 10.9% stake in its former subsidiary.
The sale was agreed on Tuesday and ownership of the shares is
expected to be completed on 3 March, cutting Bayer’s
remaining stake in Covestro to 53.3% from 64.2%.
Covestro’s share price had fallen by nearly 7% from Tuesday’s
close as of 9:06 GMT on Wednesday.
Bayer, which is currently in the process of acquiring US-based
agrochemicals and seed treatment giant Monsanto, will use the
proceeds to pay down debt, the company said.
Covestro, which benefited last year from tightness in the
toluene diisocyanate (TDI) and methyl-di-p-phenylene
isocyanate (MDI) markets, has seen its share price rise from
around €25/share shortly after listing on the Frankfurt Stock
Exchange.
According to analyst Bernstein, the sale gives Bayer greater
flexibility in its fund-raising plans to finance the Monsanto
acquisition, and could allow it to scale back the additional
equity it needs to raise.
The company is planning a €13.4bn rights issue, Bernstein
noted earlier this month, which could stand to dilute
existing shareholder equity, but the Covestro stake sale
provides scope for Bayer to reduce the scale of the
fundraising.
“As expected, Bayer said they will use the proceeds to pay
down debt, but we think it gives them more flexibility to
potentially reduce the equity raise amount,” Bernstein said
in an investor note.
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