Adnoc receives an expanded offer from Covestro
The impending takeover of German chemical company Covestro by ADNOC, an energy conglomerate from Abu Dhabi, is edging closer. ADNOC has boosted its bid to a hefty twelve billion Euro and seems determined to make it happen. DAX-listed Covestro is now set to engage in concrete deal negotiations.
ADNOC from Abu Dhabi is tenacious in pursuing Covestro, a plastic firm based in Leverkusen, after months of wooing. "We've made substantial progress in our chats with ADNOC. Consequently, we've decided to initiate concrete deal negotiations with ADNOC," Covestro CEO Markus Steilemann affirmatively stated. The oil company is said to have proposed a deal worth more than 62 Euro per share, contingent upon Covestro's auditing results, with agreements on an investment pact being necessary as well. Talks are expected to speed up from now on. ADNOC has emphasized that this offer is final.
Covestro's shares leaped more than seven percent, reaching 55 Euro at its peak, marking the highest they've been since nearly two and a half years. With an offer of over 62 Euro per share, Covestro is valued at around 11.7 billion Euro. "We appreciate Covestro AG's decision to initiate a confirmatory due diligence review based on our final offer," ADNOC acknowledged.
Covestro has been on ADNOC's radar since the previous year's summer and confirmed in September the start of non-binding exploratory discussions. According to insiders, the oil company upped its informal and non-binding offers to approximately 60 Euro per share in December, but didn't seal the deal. Covestro only confirmed that it is engaged in non-binding exploratory talks with ADNOC since then.
The management hopes it can strike a "shared understanding" with ADNOC regarding critical aspects of a potential deal, including Covestro's growth strategy. However, there's no guarantee that a deal will materialize in the end. Covestro had initially scheduled a capital markets day on Thursday but postponed it.
German workforce safeguarded until 2028
Covestro, a former plastic subsidiary of Bayer, which Bayer made public in 2015, secures its nearly 7,000 German employees from layoffs until the end of 2028. Globally, there are around 17,500 employees. Covestro's board highlighted in September that during the talks with ADNOC, it aimed to prioritize the advancement of its sustainability-driven strategy and relevant Corporate Governance regulations. The prolonged negotiations suggest that significant ground may already have been covered on several issues, according to analysts at Jefferies.
ADNOC's acquisition of Covestro would afford it, an oil company that also deals in refinery products and petrochemical items, access to more advanced materials used in electric vehicles, construction insulation, coatings, adhesives, and technical plastics. Under Sultan Al Jaber's leadership, ADNOC plans to expand into new energy sources, carbon-free fuels like ammonia and hydrogen, in addition to liquefied natural gas and chemicals.
Apart from Covestro, Adnoc has its sights set on Borealis, a plastic offshoot of OMV. For nearly a year now, Adnoc has been engaging in discussions with the Austrian energy conglomerate about merging their petrochemical daughters, Borealis and Borouge. In December, Adnoc decided to acquire a stake in fertilizer producer Fertiglobe for 3.6 billion dollars.
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In the chemical industry, this year's mergers and takeovers include ADNOC's ongoing pursuit of DAX-listed Covestro, a German plastic firm. If successful, ADNOC, an Abu Dhabi-based energy conglomerate, would significantly expand its reach in the sector, joining other companies like Covestro in activities such as electric vehicle materials, construction insulation, and technical plastics.
This proposed takeover of Covestro by ADNOC would not only have implications for the chemical industry but also for Dax companies, as it could potentially reshape the market dynamics in the region.
