Covestro AG and Abu Dhabi National Oil Co. (ADNOC) have started talks on a potential acquisition of the German firm.
"The board of management of Covestro AG has today decided, in view of the interest in Covestro expressed by [ADNOC], to enter into open-ended discussions," officials with Covestro on Leverkeusen, Germany, said in a Sept. 8 news release.
Those discussions by Covestro's board "will in particular also address the safeguarding of the further implementation of its future- and sustainability-oriented corporate strategy."
"The interest of ADNOC in our company underlines our strong position as one of the world's leading manufacturers of high-quality polymer materials and as a leader in the shift towards a circular economy," CEO Markus Steilemann said. "Beyond current headwinds in our industry, we are optimally positioned to unlock significant long-term value in highly attractive industries."
He added that regardless of the talks with ADNOC, Covestro "will remain fully focused on pursuing our successful sustainable future strategy in order to unfold our full potential."
Officials also said any agreement would require approval of the boards and regional authorities. Covestro "presently does not intend to comment on this matter any further," unless changed circumstances or events require Covestro to comply with applicable disclosure rules, they added.
In July, financial media reported that ADNOC — a state-owned energy firm — increased its bid to acquire Covestro to more than $12 billion. Covestro reportedly had rejected an $11 billion offer from ADNOC in June, with market watchers saying that price was too low.
In a recent research note, analyst Philipp Stuelken of financial website Seeking Alpha said he's bullish on Covestro.
"Even though these rumours have a high influence on the share price, I also see a compelling investment case regarding the fundamentals, which started improving," he wrote. "This strengthens hope that the down-cycle has seen its low and starts recovering."
Stuelken added that overall, improving metrics "indicate the beginning of a new business cycle despite the challenging macro-environment in Germany. … Market expectations remain very cautious, still creating a good investment case for [Covestro] even if the takeover plans of ADNOC fail. … I remain bullish for 2024 and 2025 and see substantial upside."
Covestro has U.S. headquarters in Pittsburgh. The company is a global supplier of polycarbonate resins and films, thermoplastic polyurethane, PU materials and foams, and other speciality chemicals and materials. The firm employs almost 18,000 and posted sales of $19.6 billion in its 2022 fiscal year.
Covestro's per-share stock price began the year around 38 euros ($41) but was at 53.5 euros ($57.50) in late trading Sept. 11, an increase of more than 40 percent.