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The acquisition would give Abu Dhabi National Oil Co. access to advanced materials that go into electric vehicles, thermal insulation for buildings, and engineering plastics.

Posted by Staff

June 21, 2023

2 Min Read
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Image courtesy of Covestro

Abu Dhabi National Oil Co. (ADNOC) has made a more than €10 billion ($10.9 billion) offer to take over Covestro AG, Reuters and several other media outlets reported on June 20. Stock in chemicals giant Covestro, a major supplier of polycarbonate, jumped by double digits after the news hit.

(On June 22, Bloomberg News reported that Covestro rejected the offer, saying it was too low.)

The energy giant has made an informal offer for a per-share price in the mid-50 euros, which compares with a Monday closing price of €40.31, reported Reuters, citing sources that asked not to be named because the matter is confidential. Shares in Covestro were up 14% at €46 at 1400 GMT, trading at their highest in more than a year, said Reuters.

Historically an oil and natural gas producer, ADNOC is seeking to diversify its portfolio, reports Seeking Alpha. It controls a majority of chemicals company Borouge plc and has a 25% stake in Austria’s Borealis.

Covestro’s core products, which include insulation chemicals and upholstery foam as well as polycarbonate, would give ADNOC access to advanced materials that go into electric vehicles, thermal insulation for buildings, and coatings, adhesives, and engineering plastics, reports Reuters. Vertical integration is also a factor in ADNOC’s offer, as oil is an important base product for many of those categories, adds Seeking Alpha.

Covestro currently does not have any shareholders with a stake of 3% or more, which tends to make it easier to finalize a takeover, according to Seeking Alpha. However, there are political implications to consider, as well. The German government has taken a fairly hard line when it comes to foreign M&A projects, and some members of the administration may be aligned with the view that the chemical industry is a sector of strategic importance.

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