Adnoc Continues to Seek Acquisition Opportunity for Plastics Manufacturer Covestro, but the Anticipated Breakthrough in Talks Has Yet to Occur. According to Insider Reports, Both Sides Are Still Far from an Agreement and There Is Still No Official Offer from the Arabs.

Adnoc had expressed its interest in a takeover in early summer 2023, and now five months have passed with the talks yielding no results.

The Covestro stock reacted to the still absent agreement and temporarily fell by more than six percent to just under 45 euros following the publication of the Handelsblatt report on Friday.

But the acquisition has not yet failed, as Adnoc submitted a new, unofficial offer of 60 euros per share last December, hoping to finally enable concrete negotiations and an in-depth audit (Due Diligence).

However, so far only 57 euros per share have been discussed, and Adnoc has not yet received access to the complete data room of the target company. The talks between the companies have been rather loose so far, but there have been and continue to be meetings between the top managers of both firms.

For the Executive Board of Covestro, it is crucial that the company can freely implement its strategy even under the ownership of Adnoc, which Adnoc has assured them of. In an official statement, Covestro emphasized that they are still in "open-ended discussions" with Adnoc and that the decision will depend on a convincing framework and the terms.

According to insiders, the 60 euros per share proposed by Adnoc, however, "generated little enthusiasm" at Covestro. It is estimated that Adnoc might have to offer 63 euros or more to meet Covestro's price expectations. Currently, the share price is at 47 euros.

Adnoc is aware of these demands and has formed a professional team of experienced investment bankers to drive the acquisition from London. However, some participants are surprised by how slowly the process is progressing in the Covestro case.

It is still uncertain whether Adnoc will submit a new, higher offer, but they would need several more weeks to do so. Some participants note that the internal coordination processes among the Arabs are lengthy and complex.

However, informants warn against interpreting this as waning interest from the Emirates in the acquisition. Arab companies are generally considered to be more cautious and slower in M&A processes by financial circles.

This is also evident in the negotiations between Adnoc and the Austrian oil company OMV, which is also to be taken over by the Arabs. The two companies have been in "open-ended talks" about a merger since July 2023, but so far no agreement has been reached.

According to OMV CEO Alfred Stern, they would like to create a construct with "equal parts, equal rights, and joint control," but Adnoc has not yet presented a plan. The slow approach could have several reasons, but Adnoc is not under time pressure as they aim to develop new business opportunities in the long term beyond the oil business.

Covestro, too, fits into the prey pattern of Adnoc due to its positioning as a leading global plastics manufacturer and its focus on renewable raw materials and recyclable plastics. However, due to the weak global chemical demand in the first half of 2023, the prospects are not particularly promising.

Therefore, time is on Adnoc's side and they don't need to act hastily. At the balance sheet presentation at the end of February, Covestro CEO Markus Steilemann will only be able to repeat the usual phrase: They are still engaged in "discussions with open-ended outcomes."