- Reorganization process will continue
- Sharper focus on core businesses
- Haarmann & Reimer, Rhein Chemie Rheinau and interest in PolymerLatex to
be divested
LEVERKUSEN, Germany, Dec. 6 /PRNewswire/ -- Bayer plans to transform its
current organizational structure into a management holding company with
independent operating subsidiaries. Subject to stockholders' approval, the
new structure is to be operational effective January 1, 2003. Plans to this
effect were approved by the company's Supervisory Board at its meeting on
December 6, 2001.
Following the decision made in September to transfer the Health Care
segment and the Crop Protection Business Group into legally independent
corporate units within the Bayer Group, the same action is now to be taken for
the Polymers and Chemicals business segments as well. Explaining the changes,
Management Board Chairman Dr. Manfred Schneider said: "In line with our proven
four-pillar strategy we are adjusting our organizational structure to increase
maneuverability in our markets, to improve our competitiveness, to better
exploit synergies and to align our business for potential strategic
partnerships."
Major synergy potential in Polymers
Merging Bayer's Rubber, Plastics, Polyurethanes, as well as Coatings and
Colorants business groups will create one of the world's largest polymers
companies, with sales of more than EUR 11 billion. Bayer is already a world
leader in the manufacture of polyurethane raw materials, coating raw
materials, specialty rubbers, and engineering plastics such as Makrolon, the
material for CDs and CD-ROMs.
The new company will capitalize on major synergies through shared
technological structures -- especially in manufacturing, logistics and
marketing -- and a common IT platform. With customer industries increasingly
requiring single-source suppliers and service back-up, the new company's
operations will be aligned toward markets and customer industries -- such as
automotive, electrical/electronics and construction -- thus opening up further
business opportunities. "In an improved economic climate, our polymers
business can achieve a 15 percent operating margin and generate the cash flows
necessary for sustained value creation, which is very much in the interests of
our stockholders and employees," said Schneider. "We are strong enough in
polymers to grow organically and expand from our existing position."
Plans for a strategic partnership in Chemicals
Bayer's Basic and Fine Chemicals as well as Specialty Products business
groups will also be merged to create an independent corporate unit. With some
EUR 4 billion in sales and a targeted return of 12 to 13 percent, the new
company will be one of the world's leading specialty chemicals producers. "A
major factor in this decision -- apart from the obvious synergies in
manufacturing, logistics and management -- was the need to plan for a
strategic partnership," commented Schneider. The increasingly difficult
conditions in the world market for chemicals -- especially specialties, fine
chemicals and life science intermediates -- are leading to industry
consolidation, he said. According to Schneider, Bayer cannot afford to ignore
this in the long term despite outperforming many of its competitors in terms
of growth. The medium-term goal was to forge a strategic alliance with
enhanced technological expertise, expanded marketing operations and
strengthened presence in the world's major economic regions, especially in the
United States. "By combining the two business groups into an independent
unit, we are getting ready for a partnership that could lead to a joint
venture with a similarly structured company."
Three companies to be divested
As part of this restructuring, Bayer plans to divest non-core businesses:
the wholly owned subsidiary Haarmann & Reimer of Holzminden, Germany, a
manufacturer of fragrances and flavors, and Rhein Chemie Rheinau of Mannheim,
Germany, a specialist in additives for the rubber, lubricants and plastics
industries as well as in polyurethane chemistry. Said Schneider: "These are
excellent companies with strong development potential. But we no longer
consider their activities to be core businesses. Changes in customer
structures and in the world market would require additional resources and
investments that would not be consistent with Bayer's focus on core
businesses. We are sure these companies stand to benefit from the change."
Bayer also plans to sell its 50 percent interest in PolymerLatex GmbH & Co. KG
of Marl, Germany. Since Degussa, the other joint venture partner, also wishes
to sell its interest, the sale will be effected jointly by Bayer and Degussa.
Preparations for Bayer CropScience on schedule
Following the agreement to acquire Aventis CropScience (ACS) in early
October, preparations for the new, legally independent agrochemical company
are proceeding at full speed. Subject to the approval of the antitrust
authorities, the entire crop protection activities of Bayer and ACS will be
combined into a new company named Bayer CropScience. The new company, with
anticipated pro forma sales of nearly EUR 7 billion in 2001, will be a world
leader in the agrochem industry, targeting EUR 8 billion in sales and a
20 percent operating margin for 2005.
Animal Health part of new health care entity
In a move that gives it an organizational positioning similar to that of
its competitors, the Animal Health Business Group -- currently part of Bayer's
Agriculture segment -- will transfer effective January 1, 2002, to the Health
Care segment, which also comprises the Pharmaceuticals, Diagnostics,
Biological Products and Consumer Care business groups. As announced in
September, Bayer's Health Care activities will be combined into a new Bayer
health care company. According to Schneider, this step will increase the
unit's flexibility for strategic partnerships and thus additional growth.
Based on this year's figures, the health care company's sales will exceed
EUR 11 billion.
Schneider: "Bayer will not become a financial holding company"
Schneider stressed the intention to preserve the Bayer Group's unity and
reaffirmed its focus on entrepreneurial leadership. The new organizational
structure is to enhance flexibility and sharpen Bayer's competitive edge.
"Let me make it quite clear that we are not opting for a financial holding
structure. There will continue to be structural ties between the operating
companies," declared Bayer's CEO.
The holding company's management board is to determine overall strategy,
decide on the portfolio, control resource allocation and nominate subsidiary
companies' managers. "We are convinced that all the new companies will
prosper and establish themselves as leaders in their respective markets. The
Bayer name and trademark will continue to be of great benefit. We believe the
strong cohesion provided by a holding company serves to increase the value of
the entire Group."
Separate companies to provide global services
Essential corporate services not directly assigned to the operating
companies will be merged into service companies for the benefit of the entire
Bayer Group. In Germany, for example, this applies to the Site Services
Division with its 7,000 employees, along with Enterprise Accounting and
Reporting, Central Technology, Information Management, Human Resources,
Procurement and Logistics as well as other service units. In the major
countries and regions outside Germany, too, service companies are to support
the operating subsidiaries. In smaller countries, the single Bayer entities
covering all the Group's activities will be retained.
Boost from new organizational structure
"We have set a new course for Bayer," said Schneider. "Over the next few
weeks and months we will be working hard on the details and at the same time
rigorously implementing our efficiency improvement program. This program will
yield increasing economies from year to year, with annual savings amounting to
some EUR 1.8 billion by 2005. But the reorganization will give us the boost
from which everyone will benefit -- the company, its employees and its
stockholders."
"The Board of Management and the Supervisory Board are confident that the
new concept provides the fastest route to renewed success following an
extremely challenging year," the Chairman said. "Bayer was, is and will
continue to be an attractive company that holds great promise for the future."
Bayer is an international, research-based group with core businesses in
health care, agriculture, polymers and specialty chemicals. In 2000 Bayer had
sales of EUR 31 billion, net income of EUR 1.8 billion, and approximately
122,000 employees at year end. Capital expenditures amounted to
EUR 2.6 billion, R&D spending to EUR 2.4 billion.
SOURCE Bayer
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CONTACT:
Thomas Reinert of Bayer, + 49 214 30 81941,
or thomas.reinert.tr@bayer-ag.de
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