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Covestro in Talks for Potential Takeover by Abu Dhabi National Oil Co.

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Shares of Germany’s Covestro continued to gain on Monday as the chemicals maker announced its plans to enter talks with Abu Dhabi National Oil Co. (Adnoc) regarding a potential takeover. This deal would enable the Emirati energy giant to diversify its business beyond oil.

At 1050 GMT, Covestro shares traded 3.2% higher at EUR53.14, following a 10% rally late Friday when Bloomberg reported that Covestro’s supervisory board was meeting to discuss entering formal talks with Adnoc. The bid would value Covestro at 11.6 billion euros ($12.41 billion).

Covestro is a leading supplier of polymers, which are essential in the production of various man-made materials. A takeover by Adnoc would provide them with access to chemicals widely utilized in the automotive and construction sectors. The attractive market capitalization of Covestro, approximately EUR10 billion, coupled with its position as a relatively inexpensive target compared to industry heavyweights like BASF, makes it an appealing acquisition choice according to analysts.

While Covestro has confirmed its decision to enter talks, they have emphasized that there is no guarantee that a deal will be reached. The outcome will depend on the progress made during the discussions.

Key Points:

  • Covestro plans to enter talks with Adnoc for a potential takeover.
  • Shares of Covestro rose by 3.2% following the news.
  • The bid values Covestro at 11.6 billion euros ($12.41 billion).
  • A takeover would allow Adnoc to diversify its business beyond oil.
  • Covestro is a major supplier of polymers used in various industries.
  • Analysts find Covestro an attractive and inexpensive target for acquisition.
  • Discussions will determine if a deal between the parties can be reached.

Covestro: A Potential Acquisition Target for Adnoc

Covestro, a leading player in the chemicals sector, holds significant market shares in key materials such as methylene diphenyl diisocyanate (17%), toluene diisocyanate (23%), and polycarbonates (25%). These materials are crucial for Adnoc’s plans to diversify its business, according to Jefferies analysts.

Adnoc, the Emirati company, recently announced a $150 billion investment program to expand its natural-gas, chemicals, and clean-energy operations. With no product overlap between Covestro and Adnoc, antitrust concerns would be minimal if a takeover were to occur.

Analysts suggest that an acquisition of Covestro could be a strategic move for Adnoc. However, Adnoc has not commented on the talks or the potential deal.

Markus Mayer, an analyst at Baader Helvea, highlights Covestro’s attractive traits, including its low valuation, market position, and growth profile. These factors position Covestro as a prime takeover target within Europe’s chemicals sector.

Moreover, Mayer contends that Covestro’s management and labor unions would favor an Adnoc bid. The Emirati group may choose not to restructure the company during a time when the German economy is forecasted to shrink this year.

The European Union estimates that Germany’s gross domestic product will contract 0.4% on a yearly basis, revising its previous forecast of slight growth.

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