Abu Dhabi National Oil Co., the energy giant seeking to expand its chemical operations through a series of ambitious deals, has raised its takeover bid for Covestro AG to about 11 billion euros ($12.4 billion), people familiar with the matter said.
Adnoc raised its offer to about 57 euros per share in hopes of persuading the German company to open talks, the people said. This is more than their first informal offer of around 55 euros.
The state-backed company expressed confidence in Covestro’s strategy and management, according to the people, who asked not to be identified because the information is private.
Covestro shares fell 2.9 percent in Frankfurt trading on Wednesday, giving the company a market value of 9.4 billion euros. Shares had risen in the afternoon, following a Bloomberg News report about Adnoc increasing its offer, to close at its highest level since February 2022.
Leverkusen-based Covestro last month rejected Adnoc’s previous proposal as too low, people familiar with the matter said at the time. Covestro also raised questions about Adnoc’s plans for its specialist operations.
Adnoc CEO Sultan Al Jaber has been busy looking for deals to better compete with Saudi Aramco and its chemical unit Sabic. The Abu Dhabi firm is in separate talks with Austria’s OMV AG over a possible merger of two companies they back, Borouge Plc and Borealis AG, to form a chemicals and plastics giant worth more than $30 billion.
The proposed transactions are in line with a broader plan by the UAE to attract investment and technology, as well as create new industries and manufacturing capabilities. Adnoc has been expanding a refining and chemicals center in Abu Dhabi to find additional outlets for its oil and natural gas production and to make the plastics that go into consumer goods.
Adnoc has sought to address Covestro’s concerns about its bid, including how it would help the German company’s management develop specialty chemicals operations, the people said. If negotiations begin, there could be scope for further increases in Adnoc’s offer.
Ben Kelly, an analyst at Louis Capital Markets, said Adnoc may have to raise even more to win over Covestro.
“Covestro knows Adnoc can afford to pay, so I think they’ll be patient,” Kelly said. “An improved offer of €61.5 would equate to 8x EV/Ebitda and, in our view, would be more likely to be accepted by Covestro’s board.”
Discussions are ongoing and it is unclear how Covestro will respond to the latest proposal. Adnoc and Covestro representatives declined to comment.
Adnoc, which produces almost all of the oil in the United Arab Emirates, plans to invest $150 billion to expand production capacity for crude oil, natural gas and chemicals. It is also investing in low carbon energy.
