German chemicals firm Covestro is giving ADNOC access to its books and stepping up talks based on an improved €11.7 billion ($12.5 billion) takeover offer, following more than a year of courtship by the Emirati energy company.
Covestro, a manufacturer of plastics and chemicals for construction and engineering, announced on Monday that it believes the two sides can “generally reach a common understanding regarding core aspects of a possible transaction including support for Covestro’s further growth strategy.”
Previously described as open-ended, discussions will now enter the phase of “concrete negotiations” with Covestro providing due diligence information. This follows ADNOC’s (Abu Dhabi National Oil Co) revised offer of €62 per share, up from the previous €60, according to sources familiar with the talks.
Covestro indicated that talks would proceed “in a timely manner” but emphasized that there is no certainty of an agreement. The company’s shares rose 6.4% to €54.46 by 1115 GMT.
An ADNOC spokesperson welcomed Covestro’s decision, stating, “We look forward to jointly working with Covestro to swiftly progress due diligence for this important transaction,” and noted that this was ADNOC’s final offer.
It has taken over a year for the two sides to reach this stage. 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 formal discussions.
Jefferies analysts suggest that the lengthy discussions indicate many issues are likely well-advanced. Covestro has postponed its capital markets day scheduled for June 27 “in light of the recent developments” until further notice.
ADNOC has been actively pursuing European targets. It has been in talks with Austria’s OMV to create a chemicals giant with combined annual sales of more than $20 billion. In December, ADNOC agreed to buy European chemical producer OCI’s stake in Fertiglobe, an ammonia and urea producer, for $3.6 billion. Reuters reported in April that ADNOC had considered buying Britain’s BP at one point.
