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Reports: Adnoc makes €11B takeover offer for Covestro

June 24, 2023
Energy & Chemical Value Chain

Abu Dhabi National Oil Co. (Adnoc) has approached Covestro AG (Leverkusen, Germany) with a takeover offer valued at almost €11 billion, according to reports on June 21.

State-owned Adnoc has made a preliminary offer in the mid-€50s per Covestro share range, implying a potential value for Covestro of close to €11 billion, the reports by Reuters and Bloomberg said, citing people familiar with the matter who asked not to be named for confidentiality reasons. However, a Bloomberg report on June 22 said that Covestro had rejected Adnoc’s initial offer as too low.

Adnoc would likely keep Covestro independent after any takeover, and would aim to support its management in growing business in regions such as Asia as well as its efforts to become more sustainable, the sources said. Talks are at an early stage with no certainty that Adnoc will decide to proceed with a takeover, they said. Representatives for Adnoc and Covestro declined to comment, the reports said. Shares in Covestro on June 20 rose to their highest level in more than a year to €46 per share at one point.

Covestro issued upbeat full-year 2023 fiscal guidance in April, posted first-quarter earnings that beat analysts’ consensus estimates and resumed a share buyback program.

The potential transaction would give Adnoc, a producer of refined products and petrochemicals, access to more advanced materials for sectors such as electric vehicles (EVs), thermal insulation for buildings, as well as coatings, adhesives and engineering plastics. It would also support Abu Dhabi’s previously stated plans to diversify its economy away from energy. Over the past two years, Adnoc has separately listed businesses offering investors exposure to its petrochemicals, fertilizers, drilling services, gas as well as logistics businesses.

In December 2022, Adnoc agreed to acquire 24.9% of OMV AG (Vienna) from Mubadala Investment Co. (Abu Dhabi). The OMV deal, once complete, will indirectly also increase Adnoc’s 25% holding in OMV’s subsidiary Borealis and its Abu Dhabi-listed petrochemicals business Borouge, a joint venture (JV) between Borealis and Adnoc.

A move for Covestro would mirror the expansion of other Middle Eastern energy and petrochemical players into European materials and plastics businesses. In late 2018, Saudi Aramco acquired the shares it did not already own in synthetic-rubber maker Arlanxeo from German co-owner Lanxess AG for €1.4 billion. Sabic, majority owned by Aramco, in 2018 purchased a stake of 24.99% in Clariant AG.

In May, Adnoc and US investment fund Apollo Global Management made a nonbinding proposal to acquire Novonor’s stake in Brazilian petrochemical producer Braskem SA at 47 Brazilian reais per share. Braskem announced on May 16 that the offer had been rejected.

Adnoc is currently developing the Ta’ziz industrial chemicals hub at Ruwais, Abu Dhabi, as part of its continued expansion into petrochemicals and downstream derivatives.

by: Mark Thomas


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