Abu Dhabi National Oil Co. has made a preliminary takeover approach for German chemical producer Covestro AG, people with knowledge of the matter said, a potential acquisition that would rank as its biggest-ever overseas purchase.
(Bloomberg) — Abu Dhabi National Oil Co. has made a preliminary takeover approach for German chemical producer Covestro AG, people with knowledge of the matter said, a potential acquisition that would rank as its biggest-ever overseas purchase.Â
The state-backed firm has held initial talks with Leverkusen-based Covestro to express interest in a deal, according to the people, who asked not to be identified because the information is private. Adnoc discussed a potential offer in the mid-€50s per Covestro share, the people said, implying a premium of nearly 40% to its last close and potentially valuing the company at almost €11 billion ($12 billion).Â
Covestro shares jumped as much as 18% in German trading Tuesday, a record intraday gain. They were up 16% at 3:28 p.m. in Frankfurt, giving the company a market value of €9 billion.Â
Adnoc would likely keep Covestro independent after any takeover, and aims to support its management in growing business in regions like Asia as well as its efforts to become more sustainable, some of the people said.Â
Dealmaking Ambitions
It wasn’t immediately clear if Covestro would be receptive to an offer at the level indicated by Adnoc. Some research analysts have given the company a target price as high as €64, data compiled by Bloomberg show.Â
Adnoc, which pumps almost all the oil in OPEC member United Arab Emirates, plans to invest $150 billion to expand production capacity for crude, natural gas and chemicals. It’s also investing in low-carbon energy.Â
The company operates one of the region’s biggest refineries and is developing a petrochemical hub to produce plastics and components for industrial materials. That’s part of a push by Persian Gulf oil producers to diversify from sales of crude and prepare for a world in which demand for transport fuels begins to wane.Â
The move by Adnoc shows the bold dealmaking ambitions being championed by Abu Dhabi’s top state-owned entities. Emirates Telecommunications Group Co., known as e&, has built a big stake in Vodafone Group Plc in the hopes of cherrypicking some of the choice assets being sold by the UK carrier. Sovereign fund Mubadala Investment Co. agreed last month to take control of Fortress Investment Group.Â
Plastics Push
Deliberations are in the early stages and there’s no certainty that Adnoc will decide to proceed with a takeover, the people said. Representatives for Adnoc and Covestro declined to comment.
Last year, Adnoc bought shares worth about €3.9 billion in Austria’s OMV AG from Mubadala in a bid to boost exposure to chemicals production. It also owns 25% of Borealis AG, an Austrian chemicals and plastics maker 75%-held by OMV. Adnoc in May teamed up with Apollo Global Management Inc. to bid for control of Brazilian petrochemical producer Braskem SA.
Covestro was spun out of drugmaker Bayer AG through an initial public offering in 2015. Apollo was exploring a takeover of Covestro in 2020, Bloomberg News has reported, though it didn’t proceed with a deal in the end. Several other buyout firms also approached Covestro around that time and were rebuffed by management, people with knowledge of the matter have said.Â
–With assistance from Crystal Tse, Aaron Kirchfeld and William Wilkes.
(Updates with details of potential offer, deal background from second paragraph.)
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