January 11, 2018 / 10:21 AM / 2 years ago

Bayer raises higher than expected 1.8 billion euros from Covestro placement

FRANKFURT (Reuters) - Bayer (BAYGn.DE), the drug company that is buying seed maker Monsanto MON.N, has raised 1.8 billion euros (1.59 billion pounds) from selling a 10.4 percent stake in Covestro (1COV.DE), nearing a complete divestment from the plastics company.

Germany’s Bayer in October hinted it would need less cash from shareholders than initially expected to fund the Monsanto deal, worth $63.5 billion including debt, partly because of windfalls from selling down its Covestro holding.

Covestro shares rose more than 40 percent last year, helped by rivals’ tight supplies of foam chemicals and an ongoing share buyback scheme.

Bayer sold 21 million Covestro shares for 86.25 euros apiece overnight, cutting its stake to 14.2 percent, Bayer said on Thursday.

Covestro shares were down 1 percent lower at 87.52 euros at 0822 GMT, above the placement price. The STOXX Europe 600 Chemicals .SX4P slipped 0.3 percent.

“The placement is to be offset by Covestro’s share buy-back,” said Raymond James analyst Patrick Lambert.

Under a scheme to gradually shed all Covestro stock, Bayer since last year has sold 6.5 billion euros worth of shares and also fetched 1 billion euros for bonds that it can pay back with Covestro shares.

Separately, it has relieved its pension obligations by transferring 8.9 percent in Covestro shares into Bayer’s pension trust.

The EU commission has until March 5 to complete its antitrust review of Bayer’s Monsanto deal and, if successful, Bayer is expected to launch the cash call shortly thereafter.

Bernstein analysts said in October they expect the capital increase to be in a range of 6-8 billion euros.

Reporting by Ludwig Burger and Maria Sheahan; editing by Jason Neely

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