Covestro to start deal talks after Adnoc raises bid price to €14bn

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German chemical company Covestro has agreed to enter into “open-ended” talks on a potential acquisition by the Abu Dhabi National Oil Company, after the Mideast state-owned energy group raised its offer to roughly €14bn.

Adnoc’s most recent offer for Covestro was €60 per share conveyed verbally, said people familiar with the matter. That marks an increase from June when it offered €55 per share, which at the time equated to a 40 per cent premium from Covestro’s undisturbed share price.

Covestro’s chief executive Markus Steilemann said in a statement: “The interest of Adnoc in our company underlines our strong position.” A representative for Adnoc declined to comment.

The latest offer is equivalent to an almost €11.6bn valuation for the company’s equity, before taking debt and other factors into account.

Covestro cautioned that the possible conditions of a deal would depend on negotiations, and that the company would look specifically at ensuring it can continue its sustainability strategy.

That strategy has been an issue in discussions between Adnoc and Covestro advisers, alongside the Middle East group’s willingness to invest in the German company’s future growth, the people said.

The offer by the United Arab Emirates’ Adnoc comes as the oil-rich emirate flexes its financial muscle, deploying years of excess hydrocarbon revenues into sectors that could help the state wean itself off oil dependency.

Adnoc, under the leadership of Sultan al-Jaber, who is also in charge of UAE’s hosting of the COP28 climate summit, has amassed a nearly 50-strong team of dealmakers.

The group is pursuing roughly $50bn in transactions including simultaneous deals with Brazilian petrochemical maker Braskem and Austria’s OMV as part of a push to diversify its business and expand abroad.

Covestro, one of Germany’s largest companies, is an insulation foam specialist that could help Adnoc expand its chemicals business as part of a broader diversification strategy.

The rise in energy prices that has buoyed fossil fuel companies has presented the opposite challenge to chemical companies such as Covestro.

The German company last month reported that second-quarter sales fell to €3.7bn, a more than 20 per cent drop compared to the same period last year. Earnings before interest, taxes, depreciation and amortisation slipped 30 per cent to €385mn.

Shares in Covestro, which was spun out of Bayer in 2015, have roughly halved since a peak five years ago. They closed at €51.50 on Friday, up nearly 8 per cent following a report from Bloomberg that Covestro was preparing for talks.