Covestro Agrees to Negotiations with ADNOC

11.09.2023 - Following reports at the end of June that Abu Dhabi National Oil Company (ADNOC) was looking for takeover targets in Europe and was showing strong interest in Covestro in particular, Covestro's management board now decided to enter into open-ended talks with ADNOC.

Whether, in what form and, if so, on what terms an agreement will be reached between Covestro and ADNOC is open and will depend on how the talks progress, according to a press release from the Leverkusen, Germany-based plastics manufacturer. The Covestro management board will also address in particular the safeguarding of the further implementation of its future- and sustainability-oriented corporate strategy, including corresponding regulations on corporate governance, in the talks, it said.

Markus Steilemann, CEO of Covestro, commented: “The interest of ADNOC in our company underlines our strong position as one of the world’s leading manufacturers of high-quality polymer materials and as a leader in the shift towards a circular economy. Beyond current headwinds in our industry, we are optimally positioned to unlock significant long-term value in highly attractive industries underpinned by strong secular growth trends. Regardless of the talks with ADNOC, we will remain fully focused on pursuing our successful ‘Sustainable Future’ strategy in order to unfold our full potential and further drive the transformation towards the circular economy.”

In addition to consensus on the commercial and legal transaction parameters, an agreement would also require the approval of the companies' respective boards and clearance by the relevant authorities.

Covestro currently does not intend to communicate further on the negotiations unless changed circumstances or events require it in accordance with applicable disclosure requirements, the press release adds.

In reports circulating at the end of June, it was rumored that ADNOC had made Covestro an informal offer of €55 per Covestro share, which would value the German plastics manufacturer at more than €10 billion. The Dax-listed group had previously emphasized on several occasions that it wanted to retain its independence. Covestro rejected this offer, which was later officially confirmed, as too low.

ADNOC is looking to broaden its footprint, already holding a stake in Austrian energy group OMV and its polyolefins subsidiary Borealis, with which ADNOC operates the Borouge joint venture. In July, OMV and ADNOC decided to pursue negotiations on a potential cooperation in the polyolefins business.

The group from the Emirate is also planning to take over the Brazilian petrochemical company Braskem. Here, ADNOC is acting together with financial investor Apollo, which made a similar offer for Covestro in 2020, which the Leverkusen-based company rejected.

Unlike Braskem and Borealis, both of which focus on polyolefins (polyethylene and polypropylene), Covestro operates in the highly lucrative high-performance plastics market. Buying the German plastics producer would help ADNOC build a second pillar alongside its oil and gas business and reduce the risk of being affected by oil and gas price fluctuations. On the other hand, synergies would be limited, as the Abu Dhabi-based group does not produce any of Covestro's key raw materials and major cost savings in production and logistics are unlikely.



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