* Deal boosts smaller coatings division
* Biggest transaction since 2015 Bayer spin-off
* Covestro encouraged by faster business recovery
* DSM to increase focus on nutrition and health products
FRANKFURT, Sept 30 (Reuters) - Germany's Covestro
will buy Dutch peer DSM's Resins and Functional
Materials business for about 1.6 billion euros ($1.88 billion),
banking on a rebound of a global economy depressed by the
The deal, which will likely be wrapped up by March 2021,
adds products such as coatings for optical fibres, buildings and
cars, recyclable carpets and printable plastics.
The new business will add about 1 billion euros in revenues
to Covestro's Coatings, Adhesives, Specialties (CAS) division,
it said in a statement on Wednesday.
The company has swiftly rebounded from a slump due to the
coronavirus pandemic earlier this year, and finance chief Thomas
Toepfer expected that trend would continue into the fourth
Covestro has shunned larger takeovers since it was spun off
from Bayer in 2015, mainly because expanding its two
main units - makers of transparent polycarbonate plastics as
well as chemicals for insulation slabs and upholstery foams -
would trigger antitrust pushback.
The smaller but more profitable CAS unit makes additives for
coatings and adhesives, competing with DSM, Evonik,
Vencorex of France and Wanhua Chemical.
For its part, DSM said it would hone in on its nutrition and
health business, with products such as vitamins, baby formula
and animal feed accounting for two thirds of its 2019 group
sales of 9 billion euros.
Covestro shares fell 6.8% at 0915 GMT as analysts said the
deal's merit depends on ambitious annual synergies of 120
million euros targeted by Covestro by 2025, 80 million from
lower costs and the remainder from new revenue opportunities.
DSM stock gained 4.3%.
CFO Toepfer said exclusive talks with DSM had allowed
Covestro to have 150 experts scan the target for synergies.
"We are convinced these are ambitious but absolutely
realistic numbers," he said.
The buyer plans to sell new shares worth 450 million euros
to help fund the deal.
Covestro this month said it was not in talks to be taken
over by Apollo Global Management, reacting to a report
that the private equity firm was exploring a takeover.
Barclays acted as financial advisor to Covestro.
(Additional reporting by Bart Meijer, Patricia Weiss, Arno
Editing by Riham Alkousaa and Elaine Hardcastle)