ADNOC Steps Up to Finalize $12.5 Billion Takeover of Covestro

German chemical giant Covestro (1COV.DE) has opened its books to ADNOC and intensified negotiations following an upgraded $12.5 billion (11.7 billion euros) takeover proposal from the United Arab Emirates-based energy company. After over a year of discussions, Covestro believes that a mutual understanding on key transaction aspects, including support for its growth strategy, is achievable.

ADNOC Steps Up to Finalize $12.5 Billion Takeover of Covestro
ADNOC Steps Up to Finalize $12.5 Billion Takeover of Covestro

German chemical giant Covestro (1COV.DE) has opened its books to ADNOC and intensified negotiations following an upgraded $12.5 billion (11.7 billion euros) takeover proposal from the United Arab Emirates-based energy company. After over a year of discussions, Covestro believes that a mutual understanding on key transaction aspects, including support for its growth strategy, is achievable.

On Monday, Covestro announced that the previously open-ended discussions with ADNOC, which stands for Abu Dhabi National Oil Co, have now transitioned into "concrete negotiations." This follows ADNOC’s revised offer of 62 euros per share, marking anCovestro stressed that the discussions will proceed in a timely manner, though it highlighted the absence of certainty regarding the finalization of the agreement. The company’s shares experienced a notable rise, up 6.4% to 54.46 euros by 1115 GMT.

A spokesperson for ADNOC expressed optimism about the ongoing process: "We look forward to jointly working with Covestro to swiftly progress due diligence for this important transaction," affirming that this was ADNOC's final offer.

The engagement between ADNOC and Covestro started with an initial informal approach in June 2023, but it wasn’t until September of that year that formal, albeit open-ended, discussions were initiated. The extended duration of these talks suggests that many of the transactional details have likely been substantially advanced, as noted by a Jefferies analyst.

In light of the recent developments, Covestro has decided to postpone its capital markets day, originally scheduled for June 27, to a later, unspecified date. The delay underscores the significance of the potential transaction and its impact on the company's future operations and strategic alignment.

ADNOC's pursuit of Covestro is part of a broader strategy to expand its footprint in the European chemical sector. The company has also been in discussions with Austria's OMV (OMVV.VI) to form a chemical conglomerate with combined annual sales surpassing $20 billion. Additionally, in December, ADNOC acquired a stake in ammonia and urea producer Fertiglobe from European chemical manufacturer OCI for $3.6 billion. A report by Reuters in April revealed that ADNOC had also considered acquiring Britain's BP (BP.L) for some time.

The progression of this takeover bid is indicative of ADNOC’s aggressive expansion strategy and its commitment to establishing a significant presence in the global chemicals market, emphasizing strategic partnerships and growth through acquisition.