GERMANY – The German polymer producer Covestro has granted the Abu Dhabi National Oil Company (ADNOC) access to its books and agreed to enter “concrete negotiations” for a takeover by the Middle Eastern energy giant.
This decision follows an improved offer by ADNOC, raising the bid to US$12.5 billion after more than a year of courtship.
Initial speculation about ADNOC’s interest in acquiring Covestro emerged a year ago, with reports suggesting a willingness to pay US$11 billion. Open-ended discussions began in September.
Covestro now expresses optimism that the two sides could “reach a common understanding” on core aspects of the takeover, including support for Covestro’s growth strategy.
The company has stated that talks will proceed “in a timely manner” but notes that an agreement is not certain. This would mark the largest chemical industry takeover in Europe this year.
According to a Jefferies Group analyst, the protracted discussions indicate that final negotiations could conclude soon.
Covestro, with 50 production sites and 18,000 employees, reported sales of $15.9 billion in 2023, reflecting an almost 20% decline from 2022. Following the ADNOC announcement on June 24, Covestro’s shares surged by 6.8%.
Middle Eastern oil and gas majors are increasingly interested in European chemical businesses due to the long-term decline in fuel demand, which drives energy companies to seek more resilient hydrocarbon outlets.
ADNOC’s chemical operations are mainly in commodity petrochemicals, while Covestro’s products, including polyurethane and polycarbonate, are highly specialized.
Ruirui Zong-Rühe, a partner at the consulting firm Roland Berger, explains that shifting from basic chemicals to specialties will create a more resilient and profitable chemicals portfolio.
ADNOC has been actively pursuing several European chemical firms. In December, it agreed to buy the Dutch firm OCI’s stake in the ammonia and urea producer Fertiglobe for US$3.6 billion.
Additionally, ADNOC has been in talks with Austria’s OMV to merge two petrochemical businesses: ADNOC-majority-owned Borouge and OMV-majority-owned Borealis. However, a bid to acquire control of the Brazilian petrochemical maker Braskem fell through in May.
Concurrently, Covestro announced a cost-cutting program the day after it reported progress in talks with ADNOC.
The Bayer spin-off aims to achieve annual savings of US$427 million in material and personnel costs by the end of 2028. Covestro CEO Markus Steilemann stated that this restructuring is in response to a “challenging” few years for the company.
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