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Covestro in "Concrete Transaction Negotiations" for $12.5B ADNOC Takeover

The year-long efforts of Abu Dhabi National Oil Company (ADNOC) to acquire German chemicals firm Covestro moved a step closer to a successful conclusion after Covestro said on Monday it had decided to “enter into concrete negotiations with Adnoc” and open its books for due diligence on a proposed $12.5 billion (11.7 billion euros) deal.

Covestro’s board has decided to enter into these talks with ADNOC regarding a potential transaction after Abu Dhabi’s state energy firm has raised its offer.  

“Starting point for the negotiations is a possible offer price of € 62 per Covestro share that Adnoc has indicated to Covestro, which is subject, among other things, to the results of the confirmatory due diligence and agreement on the content of an investment agreement,” the German firm said.

”We have made good progress in our discussions with Adnoc. Therefore, we have decided to enter into concrete transaction negotiations with Adnoc”, Markus Steilemann, CEO of Covestro, said in a statement.

There is no certainty that a deal would be reached, Covestro said.

A spokesperson for ADNOC told Reuters, commenting on Covestro's decision,

“We look forward to jointly working with Covestro to swiftly progress due diligence for this important transaction.”  

The offer of 62 euros ($66.62) per share is ADNOC’s final offer, the spokesperson told Reuters.

ADNOC first approached Covestro a year ago. In September 2023, Covestro launched open-ended talks with the Abu Dhabi firm.

ADNOC is pursuing deals to expand in international markets, including in petrochemicals, as the major oil producers in the Middle East are keen to expand the markets for their oil and products and lock in future demand.

But last month, ADNOC terminated talks to buy a stake in Brazil’s petrochemicals company Braskem from its controlling company Novonor.

At the end of last year, the state oil giant of the United Arab Emirates proposed a non-binding offer to buy a stake in Braskem, in an offer implying an equity value of $2.14 billion (10.5 billion Brazilian reals) for Novonor’s 38.3% stake in the Brazilian company.

By Charles Kennedy for Oilprice.com

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