C&EN: TODAY'S HEADLINES - BAYER CHEMICALS TO TAKE A SPIN

MARC REISCH

Aspirin inventor Bayer is taking its own sort of analgesic to relieve the aches and pains of running slow-growth, low-profit commodity chemical and polymer businesses.

By early 2005, Bayer will swallow hard and spin off basic, industrial, and fine chemicals, along with polymers such as rubber, styrenics, and engineering plastics, into a new company with annual sales of $6.5 billion and 20,000 employees. Bayer will remain a firm focused on health care, crop science, and materials including polyurethanes, polycarbonate, and coating ingredients with sales of $25.5 billion and 94,500 employees.

Heitmann
BAYER AG PHOTO

Like Hoechst before it, Bayer is embarking on a journey that will put its life sciences businesses at the forefront and leave BASF as the last of the three German chemical giants separated from I.G. Farben at the end of World War II to remain a broad-based chemical company. Bayer’s decision to retain its high-end polymer operations, however, means its transformation is not as radical as Hoechst’s.

“We do not have sufficient resources available to maintain or enhance the market positions of our chemicals business or all of our polymers activities,” Bayer CEO Werner Wenning says. At a press conference announcing the split, Wenning explained that the separation should reinvigorate the ailing giant’s operations by triggering “necessary entrepreneurial impulses.”

Picked to head the as-yet-unnamed firm—which will have its own stock listing—is Axel Claus Heitmann, 44, a member of Bayer Polymers’ executive committee and head of its Asia-Pacific operations. Heitmann, a chemist with a Ph.D. from the U.K.’s University of Southampton, joined Bayer in 1989 and has held a series of research and management positions in its rubber businesses.

In recent years, the poor economy has cramped the chemical maker’s style while missteps in its pharmaceutical operations led to recalls of the cholesterol-lowering drug Baycol; production delays for Kogenate, a blood-clotting drug for hemophiliacs; and controversies over the availability of the antibiotic Cipro after anthrax-contaminated letters were mailed in the U.S.

Bayer considered partnering or selling the drug business, but Wenning said “none of those options would have adequately reflected the value” of the unit. Instead, Bayer Pharmaceuticals will position itself as “a mid-size European pharmaceuticals business” that emphasizes new products such as the erectile dysfunction treatment Levitra and a Raf kinase inhibitor for the treatment of advanced renal cell carcinoma developed in collaboration with Onyx Pharmaceuticals.

In disclosing lower sales and earnings for the third quarter last week, Wenning said the new Bayer will count on growth from discovery of new active ingredients in the life sciences, new technologies such as biotechnology, and economic growth in Asia, particularly China. Spin-off company CEO-designate Heitmann says independence will allow the firm to respond faster to competition.