Industry

Adnoc makes final bid for German chemicals maker

June 25, 2024, 12:47 PM

Covestro CEO Dr Markus Steilemann. The company has rejected two previous offers from Adnoc

Offer values Covestro AG at $12.5bn
‘Good progress’ made in talks
Adnoc’s biggest ever acquisition

German chemical company Covestro AG has confirmed that it has started “concrete negotiations” over a $12.5 billion offer from Abu Dhabi National Oil Company (Adnoc).

Covestro said in a statement that Adnoc had offered €62 ($67) a share as a starting point for the negotiations, which are subject to the completion of due diligence.

In a separate statement, Adnoc confirmed that it had offered a premium of around 60 percent on the German group’s share price last June, before the talks started, and said that this would be its final offer.

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The board of Covestro, a manufacturer of polymer materials based in Leverkusen, North Rhine Westphalia, confirmed last year it had held talks with Adnoc about a possible takeover. Covestro subsequently rejected offers of €55 and €57 per share.

“We have made good progress in our discussions with Adnoc. Therefore, we have decided to enter into concrete transaction negotiations,” said Covestro CEO Markus Steilemann on Monday.

The offer values Covestro at around €11.7 billion or $12.5 billion.

Adnoc has started pushing deeper into the petrochemical sector as a part of a $150 billion business expansion strategy to diversify revenues.

If the Covestro deal is finalised, it will be Adnoc’s biggest ever acquisition.

In November it bid for a 38 percent share in Braskem, a Brazilian petrochemical company, although last month Adnoc revealed it had ended talks.

In December Adnoc agreed to pay OCI of Egypt $3.6 billion for the shares it held in Fertiglobe, a fertiliser joint venture. It is also in the process of merging Borouge, an Abu Dhabi polymer maker, with Borealis, a petrochemical company it partly owns.

Many analysts think gasoline and diesel demand is likely to decline as consumers adopt electric and other greener vehicles, while demand for plastics will expand at around 1 to 1.5 times annual global GDP growth.

Although there was softening demand growth and surplus capacity in the petrochemical industry last year, the sector’s prospects are improving this year, according to analysts.

Covestro generated sales of €14.4 billion in 2023. At the end of last year, the company had 48 production sites worldwide and employed approximately 17,500 people.