German chemicals manufacturer Covestro has confirmed that it is in discussions with Abu Dhabi National Oil Co. regarding a potential takeover. This confirmation comes after weeks of speculation surrounding the negotiations between the two companies.
On Friday, Covestro announced that its supervisory board was meeting to discuss the possibility of entering into formal talks with the state-owned Emirati oil giant. Shortly after this announcement, Bloomberg reported that Abu Dhabi National Oil Co. was valuing Covestro at 11.6 billion euros ($12.41 billion). As a result, Covestro shares surged over 10% in Friday afternoon trading. The positive momentum continued on Monday morning, with shares rising by 3% to EUR53.04.
Covestro is a leading supplier of polymers, which are natural or synthetic substances used in the creation of various man-made materials. These products have widespread applications in the automotive industry and are also commonly used for insulation in the construction sector.
The company holds a significant market share in key materials such as methylene diphenyl diisocyanate (17%), toluene diisocyanate (23%), and polycarbonates (25%). These materials would greatly assist Abu Dhabi National Oil Co. in its efforts to diversify its business.
According to Jefferies analysts, the potential takeover of Covestro would be mutually beneficial for both parties, as it would allow the Emirati company to expand its business and strengthen its position in the market.
Overall, these talks signify an important development in the future of Covestro and the potential for collaboration between the German chemicals manufacturer and Abu Dhabi National Oil Co.
Adnoc Considers Potentially Strategic Deal with Covestro
Last year, the Emirati company, Adnoc, announced a massive $150 billion investment plan to expand its natural-gas, chemicals, and clean-energy operations. Analysts have now suggested that a deal with Covestro could be a strategic move for Adnoc.
Adnoc has not yet commented on the ongoing talks or the reasons behind a potential deal.
Covestro currently has a market capitalization of EUR9.95 billion, significantly lower than the valuation of about EUR40 billion for German chemicals giant, BASF. Analyst Markus Mayer from Baader Helvea believes that Covestro’s attractive low valuation, market position, and growth profile make it an appealing target for acquisition within Europe’s chemicals sector.
Despite this, the group has stressed that the outcome of these discussions is uncertain.
Covestro has released a statement stating, “The nature, form, and potential terms of any agreement between the parties remain undetermined and will depend on the progress made in future negotiations.”
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