By Neetha Mahadevan

FRANKFURT--Bayer AG said Friday it will proceed with an initial public offering of stock in its plastics division Covestro AG, formerly known as Bayer MaterialScience.

Covestro will seek a listing in the Frankfurt Stock Exchange, Bayer said.

The offering will consist solely of new shares issued through a capital increase. The company expects the IPO to be completed in the fourth quarter this year.

Covestro intends to use the proceeds from the IPO primarily to repay debt owed to Bayer.

Since the announcement of Bayer's plans to separate the unit last year, the pharmaceutical company has been gradually stepping closer to floating its 11 billion euros ($12.3 billion) specialty chemicals business.

Write to Neetha Mahadevan at neetha.mahadevan@wsj.com

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(END) Dow Jones Newswires

September 04, 2015 02:46 ET (06:46 GMT)