Parting Ways, Making a Splash

Bayer's Lanxess and MaterialScience units may be parting ways on July 1, but the two companies that have been carved out of Bayer's chemicals and polymers business made public appearances together this month in Leverkusen, Germany, and New York City.

They were at press conferences billed as "pre-K" events--media gatherings that give a sneak peak at what companies will showcase at the K 2004 plastics show coming up this October in Dusseldorf, Germany. But the companies also seized the opportunity to show off their new identities.

In the reshuffling of operations to form Lanxess, Bayer MaterialScience was dealt the specialty end of the polymers operations built up over the years by the Leverkusen-based chemicals giant. Unlike Lanxess, MaterialScience will remain an independent company under the Bayer corporate umbrella.

As Hagen Noerenberg, chairman of Bayer MaterialScience, put it, "Our portfolio comprises highly promising growth products, excellent technologies, and a well-stocked innovation pipeline." All that will support a unit that last year had sales of nearly $9 billion.

The company is focusing on three main polymer families--urethanes, polycarbonates, and thermoplastic urethanes--and coatings, adhesives, and sealants. It has two subsidiaries: H. C. Starck, specializing in electronic metals and ceramics, and Wolff Walsrode, specializing in cellulosic derivatives and food packaging. Underpinning MaterialScience's chemistry is its basic chemicals unit, which supplies chlorine and caustic soda.

Ian Paterson, board member responsible for marketing and innovation, said the materials science unit will not pursue divestitures after the separation. "We feel settled with the portfolio we have," he said.

Rather, Paterson stressed that MaterialScience's businesses in polycarbonates and isocyanates are built comfortably around phosgene chemistry. This chemistry, he added, provided part of the rationale for the fault line that will soon exist between Lanxess' styrenic polymers and Bayer MaterialScience's polycarbonates.

The company expects Asia--particularly China--to fuel its growth over the next five years. At its Caojing, China, facility alone, Bayer MaterialScience plans to spend $1.8 billion on new polyurethane and polycarbonate plants.

In North America and Europe, Bayer MaterialScience plans to focus on improvement projects at existing plants rather than construction of new ones. Paterson explained that the priority is to have enough capacity to serve local markets.

Lanxess, meanwhile, will focus on the commodity end of the polymers and rubber business. According to Ulrich Koemm, designated board member responsible for polymers, it will have established products and well-developed expertise in plastics and rubber ready to be put to use "to assert ourselves on established markets and move into new, attractive market segments."

Polymers and rubber accounted for roughly 60% of Lanxess' pro forma 2003 sales of about $4.2 billion. Its engineering plastics segment includes semicrystalline polyamides and polyesters as well as styrene copolymers and blends; its performance rubber segment specializes in elastomers, such as polybutadiene and butyl rubber and halogenated derivatives. Its other two segments are chemical intermediates and performance chemicals.

IN JULY, Lanxess will begin life wholly owned by Bayer AG. But the German giant is planning a spin-off or initial public offering of Lanxess by early next year. Unlike Bayer MaterialScience, Lanxess plans to take a hard look at its portfolio, Koemm said. "Lanxess has to do some restructuring. The sale of one or more business units is probable."

Koemm isn't willing to give up on styrenic polymers simply because they are maturing, however. "The focus at Lanxess will be on tried-and-tested, mature products," he said. "Taking this as a starting point, we are looking to move increasingly and systematically into attractive market segments that are initially niche markets but also have high growth potential."

Bayer MaterialScience's presence at the K show will focus on "ideas and visions for the future, some of which extend far beyond our current portfolio," Paterson said. Such concepts, he suggests, include memory sticks, check-card formats, and programmable keys with holographic film storing data.

Also covered will be a range of recent innovations, including novel designs for automobile rear-side windows and sunroofs, and even polyurethane leg ropes for surfers. In addition to specific applications, the company will present what Paterson called "a comprehensive package of services that our customers both want and expect," ranging from process optimization to plastics-dyeing support.

The K show will be Lanxess' first major public appearance after its formation, giving the new company the opportunity to show off some of its recent innovations. High on the list are new products meant for toys and food packaging. For example, Lanxess has petitioned the Food & Drug Administration for approval to use the new company's Macrolex colorants for polycarbonate and polystyrene packaging.

They may be separating, but Bayer MaterialScience and Lanxess, far from being half of what they once were, seem to have enough ideas for two companies.