Frankfurt, Germany, Nov. 11--Chemical and drug maker Bayer AG plans to spin off its industrial chemical division and part of its polymers division by early 2005 in an effort to strengthen its remaining businesses.
The move announced Friday represents a major restructuring for the German company, which has been struggling in the past three years after problems with key drugs.
Company chief executive Werner Wenning said that the restructuring would benefit the spun-off unit as well as the remaining company, which would keep three core businesses: drugs and health care equipment, farm chemicals, and specialized materials.
Wenning said those businesses had strong potential for growth, but would require heavy investment in research and development.
"This means we do not have sufficient resources available to maintain or enhance the market positions of our chemicals business or all of our polymers activities," he said in a statement.
Polymers, made from molecules combined in long chains, comprise a wide variety of materials such as plastics and rayon, or artificial silk.
Bayer also said it would also re-position its pharmaceuticals unit to focus more strongly on Europe.
The company, based in Leverkusen near Cologne, in western Germany has been through a turbulent two years. In August 2001, it lost a leading drug when it had to withdraw Lipobay, also called Baycol, and has also had production problems that have hurt sales of its anti-hemophilia drug Kogenate.
The company has been selling peripheral businesses and seeking partners for core units after warning in 2001 that such setbacks would cut deep into earnings.
For a time Bayer sought a partner for its drug business, which some analysts felt was too small to hold up against larger competitors. That search did not result in a partnership, but Bayer did bulk up its farm chemicals business with its 2002 purchase of Aventis CropsScience for euro7.25 billion. The deal made it the world's No. 2 supplier of farm chemicals.
Still, Bayer saw second-quarter net profit fall 56 percent from the same period a year ago.
The spinoff company, dubbed NewCo., would be created in a stock-market offering to be completed no later than early 2005, would have an estimated euro5.6 billion ($6.4 billion) in annual sales and a work force of 20,000, Bayer said.
The remaining Bayer organization would have, by comparison, sales of around euro22 billion ($25 billion) annually.
The chief executive-designate of the new company is Axel Claus Heitmann, currently head of Bayer's Asia headquarters in Shanghai, China.
