Covestro to cut its teeth on small M&A deals

Bloomberg

Covestro AG, the German chemical maker with roots dating back more than 150 years, is acting like a young upstart as it considers its first acquisitions after former parent Bayer AG completed cutting ties this month.
Covestro wants to add polymer technology and broaden its coatings, adhesives and specialty-products offerings, said Patrick Thomas, who steps down as chief executive at the end of this month. The manufacturer will focus initially on bite-size deals rather than any large purchase to avoid excessive risk to its business, Chief Financial Officer Thomas Toepfer said.
“The limiting factor is not so much financing” given the company’s leverage at just 0.4 times earnings, Toepfer said in a joint interview with CEO Thomas in London. Instead, Covestro should “get some experience and build some capability, and go from walk to run to fly.” After profiting in the 1990s from demand for basic plastics used in TVs and compact disc cases, Leverkusen-based Covestro is turning its attention to new polymers and composites as industrial customers seek lightweight materials for cars, top-end laptops, sport shoes and planes. Rather than battle Chinese commodity-chemical producers on price and volume, it’s focussing more on innovation to improve the performance of polyurethane foams and polycarbonates for replacing heavier metal parts.