German chemicals company Covestro AG confirmed on Sept. 8 that its Management Board has decided to begin open-ended discussions with Abu Dhabi National Oil Co. (ADNOC) about the state-backed energy group’s takeover bid of some €11.6 billion (approximately $12.4 billion).
The possibility that a deal between the two parties “will be reached is open and will depend on the course of the forthcoming discussions,” Covestro said in a statement.
Covestro’s confirmation follows weeks of speculation that the two companies could begin negotiations after ADNOC expressed interest in June. ADNOC indicated last month that it was willing to boost its informal offer to about €11.6 billion provided Covestro agreed to enter formal talks, according to a Bloomberg report at the time (GM Aug. 18, p. 29).
ADNOC is reported to be willing to fund about $8 billion in investments at Covestro after completing the deal, an offer that may help gain support from executives and labor officials, Bloomberg reported this week, citing unidentified people familiar with the matter.
“ADNOC might be an owner which might not restructure the group,” said Baader Helvea analyst Markus Mayer, as cited by a Dow Jones report. “The unions and the management will prefer it over other potential interested parties, in our view.”
Covestro produces precursors for polyurethane foams and high-performance plastic polycarbonate, as well as precursors for coatings, adhesives, sealants, and specialty products, including films.
ADNOC CEO Sultan Al Jaber is reportedly hunting for acquisitions that would enable the energy group to better compete with Saudi Aramco’s SABIC chemicals business, and to help develop its own downstream and renewable energy options.