Covestro Likely to Recommend Takeover Bid by ADNOC
Covestro, a provider of high-tech polymers based in Germany, on Tuesday said that it was likely to recommend the $16.3 billion takeover bid by Abu Dhabi National Oil Company (ADNOC) to the company’s shareholders, subject to a final review of the offer.
Covestro has signed an investment agreement with entities of the ADNOC Group, including ADNOC International Limited, and its indirect subsidiary ADNOC International Germany Holding AG (Bidder) on October 1.
The agreement stipulates, among other items, that the Bidder will make a public takeover offer for all outstanding shares of Covestro at a price of $67.08 per share. In addition, ADNOC International has committed itself to fully support the Covestro in further executing its “Sustainable Future” strategy.
To this end, the Bidder shall subscribe to new Covestro shares at the offer price via an increase of the company’s share capital by 10% under simplified exclusion of subscription upon the completion of the transaction. This will result in an amount of $1.27 billion proceeds at an offer price of $67.08 which Covestro will use to foster the further implementation of its growth strategy.
On October 25, the Bidder, following approval by Germany’s Federal Financial Supervisory Authority (BaFin), has published the corresponding offer document in relation to all outstanding Covestro shares at an offer price $67.08 per Covestro share.
The Board of Management and the Supervisory Board of Covestro will now carefully review the offer document and issue a reasoned statement pursuant to Section 27 WpÜG, a special procedure “Company Takeovers” established by BaFin, in due course.
“Subject to the review of the offer document, the Board of Management and the Supervisory Board assumed that they will recommend the acceptance of the offer to the Company’s shareholders,” Covestro said.
Stable Sales in 9M
Announcing its financial results, Covestro said that in the first nine months of 2024, Covestro’s sales remained largely stable at $11.69 billion compared with $11.90 billion in the same period of the previous year.
The increase in volumes across the Group did not offset the demand-related decline in average selling prices in the first nine months. That is also reflected in the EBITDA for the first nine months of 2024, which fell by 7.2% to $952.13 million as against $1.02 billion in the previous year.
The net income fell to –$80.07 million (previous year: –$11.9 million). Free Operating Cash Flow for the nine-month period amounted to –$177.44 million (previous year: $1172.03 million), the company said.
In the third quarter of 2024, Covestro continued to increase its volumes sold, particularly in the Europe, Middle East and Latin America (EMLA) and APAC regions.
Compared with the same quarter of the previous year, Group sales remained stable at around $3.9 billion, as lower raw material prices led to lower selling price levels (previous year: $3.86 billion). Compared with the third quarter of 2023, the Group’s EBITDA increased by 3.6% to $310.52 million (previous year: $299.70 million), thus falling within the expected range of $270.49 million to $378.69 million. The net income reached $35.70 million (previous year: $–33.54 million). Free operating cash flow decreased to $121.18 million (previous year: $333.24 million), primarily due to lower operating cash flows.
Covestro CEO Dr Markus Steilemann said that his company concluded Q3-2024 with higher sales volumes and improved earnings.
“Nevertheless, the current market environment remains challenging. Our focus is therefore clear: We continue to do our homework, focus on the levers we can control and consistently implement our ‘Sustainable Future’ strategy. In doing so, we not only lay the foundation for future success and sustainable growth, but also make steady progress towards becoming fully circular,” he added.
