Bayer could help fund deals by selling plastics biz

Germany's Bayer has been on the sidelines while other Big Pharma players have been striking deals to expand or refocus. But that may not be for long with Bayer working on a couple of deals and thinking about unloading its plastics business to help pay for an expansion.

Bayer is reported to be a suitor for Merck's ($MRK) consumer health business and may also be looking at a run at Pfizer's ($PFE) former animal health business Zoetis, sources tell Bloomberg. Analysts say its Bayer MaterialScience, which reported better-than-expected revenues Monday, might generate €7.8 billion ($10.8 billion) in a sale to help pay for a deal. Bayer started thinking in that direction after Evonik Industries recently showed some interest in the plastics business, the news service reports.

With improved revenues and falling commodity prices, Helvea analyst Odile Rundquist told Bloomberg the time is right to dispose of the plastics business and expand in pharma. "I think it would be a very good time, because now they are really getting some critical mass in pharma," the Geneva-based analyst said. "I think if they were to buy something else in health care, it would be a good move."

Reuters, also citing sources, says that Bayer and British consumer products behemoth Reckitt Benckiser have each offered about $13.5 billion for the Merck business, as they find themselves in an auction for the unit. Andrew Baum, a Citigroup analyst based in London, noted to investors today that as its peers have struck deals to gain size, Bayer has been left with less of the market, Bloomberg said. With CEO Marijn Dekkers adamant that the company's divisions should be among the tops in their categories, Baum believes a deal for Zoetis could also be in the cards.

 

The prognostication came after Bayer reported better-than-expected first-quarter earnings Monday at €2.74 billion ($3.79 billion), up from €2.45 billion a year earlier, beating analyst estimates of €2.56 billion, Bloomberg said. Those numbers were boosted in part by sales of blood thinner Xarelto, which it shares with Johnson & Johnson ($JNJ), and Eylea, the eye drug it shares with Regeneron ($REGN). It said sales from its pharma biz were up 14.9%, reaching €2.782 billion. Bayer's consumer health business, on the other hand, was unable to generate any growth for the quarter. The German company said revenues in the division were flat at €1.79 billion.

- read the Bloomberg story
more from Bloomberg
- read the Reuters story
- here's the earnings announcement

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