Bayer AG will spin off its MaterialScience plastics group into a separate, publicly-traded company within the next 12 to 18 months.

The German chemical giant today confirmed reports that the split would allow the main company to operate as a life sciences business. In a statement, it said that the decision had been made on Sept. 2, but the supervisory board would fully discuss the plan during a meeting today.

“The board of management of Bayer AG plans to focus the Bayer Group entirely on the Life Science businesses — HealthCare and CropScience — and float MaterialScience on the stock market as a separate company,” it stated. “In this way Bayer would position itself as a world-leading company in the field of human, animal and plant health.”

An independent MaterialScience business will have better access to capital and greater flexibility, said Bayer, based in Leverkusen, Germany.

Bayer said in a statement that its supervisory board “unanimously approved” the management board's decision. It has not stated where the stock in the new company will be traded.

Investors appeared to favor the move, sending Bayer's per-share stock price up 5 percent to more than 111 euros ($144) on the Frankfurt Stock Exchange's Xetra platform in the hours following the announcement.

The MaterialScience business had been at risk of being starved of investments while Bayer funneled the bulk of its development and research into the more profitable pharmaceuticals business in the future, officials said.

As a separate company, MaterialScience can align its organizational and process structures and corporate culture toward its own industrial environment and business model, said Bayer.

Additionally, the separation gives MaterialScience the opportunity to be more flexible in the face of global competition

“We firmly believe that MaterialScience will use its separate status to deploy its existing strength even more rapidly, effectively and flexibly in the global competitive arena,” said Marijn Dekkers, chairman of the management board of Bayer.

He added that the separate MaterialScience business would be able to align its strategy and corporate culture to technological and cost leadership. It will have greater freedom to make investment and portfolio decisions.

Dekkers added: “We have steadily invested in facilities, even in difficult economic times.”

Bayer invested more than 3.8 billion euros ($4.8 billion) in property, plant and equipment and research and development for the MaterialScience business between 2009 and 2013. He pointed to world-scale production facilities in Shanghai and the new TDI plant in Dormagen, Germany, which is to be officially inaugurated in December.

Market analyst Phil Karig said that it's not surprising that Bayer is focusing its remaining assets on medical and agricultural businesses instead of on commodity chemicals and plastics.

“Other companies have followed similar strategies in the past, including Monsanto, which spun off its ABS business and others to focus on agricultural chemicals and patented seeds,” said Karig, managing director of the Mathelin Bay Associates LLC consulting firm in St. Louis. “The margins and growth rates for medical and agricultural businesses are higher than for commodities such as plastics.”

He added that the stock market “rewards businesses that have higher growth and margins with higher stock prices and higher price to earnings multiples.”

Following the intended spinoff, MaterialScience will be Europe's fourth-largest chemical company; it had pro forma global sales in 2013 of more than 11 billion euros ($14.1 billion). The new company is planned to have a global workforce of roughly 16,800, including about 6,500 in Germany. It will have a new name and a separate identity and be headquartered in Leverkusen, said Bayer.

In the second quarter of 2014, BMS posted sales of 2.9 billion euros ($3.8 billion), up 4 percent vs. the same quarter in 2013. But the unit's earnings before interest, taxes, debt and amortization (EBITDA) fell two percent to 270 million euros ($350 million) in the same comparison.

Polyurethanes accounted for more than 53 percent of second-quarter sales for BMS, with polycarbonate bringing in more than 23 percent. The unit's second-quarter sales volume in pounds grew 6 percent vs. the year-ago period.

Dekkers said both companies had “excellent prospects for success” in their respective industries. Employment levels were expected to remain stable over the next few years, both globally and in Germany.

Plastics News Senior Staff Reporter Frank Esposito contributed to this report.