Bayer cuts stake in Covestro to 44.8%

German chemicals and drug company Bayer has cut its stake in Covestro in an effort to help fund its acquisition of US seeds giant Monsanto.

Bayer has reduced its direct holding in high-tech polymer supplier Covestro to 44.8% from 53.3% by selling 17.25m shares at €62.25 each via an accelerated bookbuild. The company has also placed bonds exchangeable into Covestro shares maturing in 2020 in an aggregate principal amount of €1bn, with an interest rate of 0.05% a year.

The issue price was fixed at 105.25% of the principal amount and the initial exchange price at €80.93. Upon exchange of the bonds, Bayer will have the flexibility to settle the bonds in cash, by delivery of Covestro shares or by a combination thereof.

Bayer, which agreed to buy Monsanto in September 2016 for $128 per share, is aiming to achieve full separation from Covestro in the medium term. Covestro will continue to be fully consolidated in Bayer's financial statements since Bayer should continue to hold the majority at a Covestro annual stockholders meeting after these transactions are completed.

At 1030 BST, Bayer shares were down 1.3% to €117.35 while Covestro was down 4% to €63.37.