Abu Dhabi National Oil Co. indicated it is willing to raise its informal offer for Covestro AG to about 11.6 billion euros ($12.7 billion) on the condition that the German chemical group agrees to enter into formal talks, people with knowledge of the matter said.
The state-backed energy giant has verbally indicated to Covestro that it could return with a new written proposal of 60 euros per share, should negotiations begin, the people said. An offer at that level would represent a premium of about 29% to Covestro’s closing share price on Friday.
Covestro’s management and supervisory board are considering their options and may respond as soon as this week, the people said. Covestro shares rose as much as 8.8% on Monday. Shares were up 5% at 2:23 p.m. in Frankfurt, giving the company a market value of about 9.4 billion euros.
Any such move by Adnoc would better previous informal offers of 55 and 57 euros per share. The most recent of them, filed in July, is still considered too low by Covestro, the people said. Both the companies and their advisers have continued to discuss the merits of a transaction, they said.
In addition to price, Adnoc has been trying to address Covestro’s other concerns about a transaction, including how the German company’s management would help develop specialty chemicals operations, Bloomberg News previously reported.
Discussions are ongoing and Adnoc has not made a final decision on whether, or by how much, to raise a bid for Covestro, said the people, who asked not to be identified to discuss confidential information. Adnoc and Covestro representatives declined to comment.
Deal Hunt
Adnoc CEO Sultan Al Jaber is on the lookout for deals to better compete with Saudi Aramco’s Sabic chemical unit and to develop the company’s downstream and renewable energy operations. Adnoc 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 potential transactions dovetail with a broader plan by the UAE to attract investment and technology, as well as create new industries and manufacturing capabilities. Separately, Adnoc has started delivering liquefied natural gas to Germany, stepping in to help the country wean itself off Russian supplies.
Still, Covestro CEO Markus Steilemann recently expressed some concern about the trend toward buying or financing more assets by entities backed by autocratic states. “You only have to think what it means for the entire Western world if this trend continues unabated and conflicts break out,” he said in an interview with German business newspaper Handelsblatt this month.
Covestro said in early August that it expected full-year profit to be in the lower half of a guidance range of 1.1 billion euros and 1.6 billion euros, citing declining global demand . German chemical companies BASF SE, Evonik Industries AG and Lanxess AG have warned of a worsening outlook for the rest of the year, blaming weak global industrial output and sluggish demand for consumer goods.
