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German chemical group Covestro rejects Abu Dhabi’s 13 billion-euro takeover proposal

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German chemicals company Covestro has rejected a 13 billion euro bid from Abu Dhabi National Oil Company, putting pressure on the state energy company to raise its bid if it wants a deal .

ADNOC’s bid of around 13 billion euros, which was supposed to be one of the biggest deals this year, was rejected by Covestro on Thursday, according to people familiar with the matter. Covestro People familiar with the matter said further contact was not ruled out.

The offer values ​​Covestro shares at around 55 euros per share, a premium of around 40 percent to its undisturbed share price of around 39 euros per share. That equates to a valuation of nearly 11 billion euros for the company’s equity, before debt and other factors are taken into account.

The oil company will support the management strategy, a person familiar with the matter said.

Covestro and representatives Adnock Both declined to comment.

It comes as the oil-rich emirate flexes its financial muscle, funneling years of excess hydrocarbon revenue into industries that could help wean the country off oil.

Covestro, one of Germany’s largest companies and an insulating foam specialist, could help ADNOC expand its chemicals business as part of a wider diversification strategy. ADNOC, under the leadership of Sultan al-Jaber, who is in charge of the UAE’s hosting of the COP28 climate summit, is seeking to maximize the value of the Gulf state’s resources by expanding downstream production.

The oil company has also been working to reduce its reliance on fossil fuels at its large, energy-intensive plants, investing in green technologies and recycling solutions that are increasingly being used as demand for less environmentally harmful components grows. more attractive.

Rising energy prices have boosted fossil fuel companies, but have created the opposite challenge for chemical companies such as Covestro. In March, the company warned This year’s profit will be “well below” 2022 levels.

Last year, its earnings before interest, taxes, depreciation and amortization came in at 1.6 billion euros, almost half that of the previous year. “Sharp increases in energy and raw material prices this year, especially in Europe, have put pressure on the company,” Covestro said at the time.

Europe’s gas crisis has hit Germany particularly hard, raising concerns about the future of energy-intensive industries such as chemicals on the continent. BASF, the world’s largest chemical company by revenue, announced last year that it would “permanently” scale back its operations in Germany.

Covestro, which was spun out of Bayer in 2015, has roughly halved its share price since its peak five years ago. It was priced at 47.90 euros on Thursday afternoon, up nearly 20 percent since the start of the week after Bloomberg reported on Abu Dhabi National Oil Co.’s (Adnoc’s) practices. The stock had risen about 1.6% as of Thursday afternoon.

The national oil company has set aside $150 billion to invest in natural gas, chemicals and clean energy as companies wean themselves off fossil fuels. The state-owned company is working to expand domestic production of related products such as crude oil, natural gas and plastics.

It already owns a majority stake in Borouge, a joint venture with Austria’s Borealis.

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