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Germany’s Covestro rejects takeover bid from Adnoc

The possible deal with Adnoc could value German oil and gas producer Wintershall Dea at more than $11bn Reuters/Toru Hanai
The possible deal with Adnoc could value German oil and gas producer Wintershall Dea at more than $11bn

German plastics and chemicals maker Covestro AG has rejected an initial takeover proposal from Abu Dhabi National Oil Co (Adnoc), saying the offer was too low, two sources familiar with the matter said.

Reuters reported on Tuesday that Adnoc had approached Covestro with a takeover proposal worth more than €10 billion ($11 billion). Covestro and Adnoc declined to comment on Thursday’s report.

“Covestro is a very well positioned, cyclical company that is currently cheaply valued. It would probably only be a matter of price whether the existing shareholders would accept such a takeover offer,” Union Investment fund manager Arne Rautenberg said.

Covestro, a maker of transparent polycarbonate plastics as well as chemicals for insulation and upholstery foams, in April issued earnings guidance that reassured markets about its growth prospects. It also resumed a share buyback program.

However, supply and demand for polyurethanes is deteriorating, an industry investor said, adding that Covestro could well accept a higher offer between €60 and €65 per share.  

A takeover would give energy giant Adnoc, also a maker of refined products and petrochemicals, access to more advanced materials that go into electric vehicles, thermal insulation for buildings as well as coatings, adhesives and engineering plastics.

As part of that transformation strategy, which also invited foreign investment, Adnoc began floating units in late 2017.

Over the past two years, the Abu Dhabi oil firm has separately listed businesses offering investors exposure to its petrochemicals, fertilisers, drilling services, gas as well as logistics businesses.

Adnoc CEO Sultan Al Jaber is leading the company’s push into new energy, low carbon fuels, such as ammonia and hydrogen, as well as liquefied natural gas and chemicals.