ADNOC ups takeover offer for Germany’s Covestro to $12.5b for one last time
ADNOC raises offer to 62 euros per share from 60 euros; Covestro shares jump 6%
Abu Dhabi: After more than a year since talks began, Germany’s Covestro AG said it’s entering “concrete negotiations” with Abu Dhabi National Oil Co. (ADNOC) on a potential takeover that could value the target company at about €11.7 billion ($12.5 billion).
ADNOC indicated to Covestro it’s considering a potential offer of €62 per share, subject to confirmatory due diligence, according to a statement Monday that confirmed an earlier Bloomberg News report. As a result, Covestro is giving ADNOC access to its books and stepping up talks, it said in a statement.
Covestro, which makes plastics and chemicals for construction and engineering, said on Monday it believed the two sides could “generally reach a common understanding regarding core aspects of a possible transaction including support for Covestro’s further growth strategy”.
Now in “concrete talks”
Discussions, which had previously been described as open-ended, will now involve Covestro providing due diligence information, after ADNOC raised the per share offer, it said. Covestro said talks would proceed “in a timely manner” and there was no certainty of an agreement.
ADNOC welcomed Covestro’s decision, saying it looks forward to jointly working with Covestro to “swiftly progress due diligence for this important transaction”, adding that this was ADNOC’s final offer.
With ADNOC and Covestro both annoucing their intention to proceed with the negotiations about a potential transaction, Covestro further noted that: “At this time, there is no certainty whether the upcoming negotiations will lead to an agreement. There is also no certainty as to the final terms of any such agreement.
“Any potential transaction would, in addition to mutual agreement on the commercial and legal transaction parameters, among other things, be subject to the approval of the respective boards of the parties and clearance by the competent authorities.”
Series of European targets
ADNOC has been pursuing a series of European targets. It has also been in talks with Austria’s OMV to create a chemicals giant with combined annual sales of more than $20 billion.
ADNOC’s initial informal offer to Covestro was reported in June 2023, but it wasn’t until September last year that the German company entered into open-ended formal discussions. Analysts at US brokerage Jefferies wrote in a note that the length of the discussions would suggest that many of the issues are likely to be well advanced.
In December, Covestro agreed to buy European chemical producer OCI’s stake in ammonia and urea producer Fertiglobe for $3.6 billion. Reuters reported in April that it had for a while considered buying Britain’s BP.
Investors cheer new move
Covestro, which saw its shares up 6.4 per cent to 54.46 euros, postponed its capital markets day scheduled for June 27 “in light of the recent developments” until further notice, the company said.
The German firm, based in Leverkusen, has expertise in areas such as chemical recycling that are key for the future of the industry, and which ADNOC is interested in. Reports first emerged last year that ADNOC had approached Covestro about a potential takeover but initial advances were rejected, leading the UAE side to improve its offer.
The Abu Dhabi firm’s initial approaches included a takeover price of 55 euros and then 57 euros per share, according to Bloomberg News.
The vital German chemicals industry - which accounts for about five percent of the country’s GDP, and also includes titans like BASF - has in recent times been gripped by crisis.
- with inputs from Agencies