It wasn’t immediately clear whether the price offered was in the mid €50-per share range, as earlier reports suggested. In that case, market watchers said it was unsurprising that the Leverkusen-based company spun off from Bayer in a 2015 international public offering (IPO) would reject it, even if a valuation in that range put the company’s worth at nearly €11 billion, a 40% premium.

In a letter bearing yesterday’s date, Bloomberg’s sources said Covestro told ADNOC‘s CEO Sultan Al Jaber that the proposed valuation didn’t warrant further talks, while also raising the question of whether the Middle East group would be the best owner for some of the company’s assets.

The final word apparently has not yet been spoken. Bloomberg’s sources said they believed Covestro’s management might soften its stance if better conditions were offered.

The polycarbonates and polyurethanes producer’s share rose again slightly in June 22 trading, reaching the highest intraday level in almost three months and valuing the company at €9.3 billion.

Commenting on the evolving story, analysts for Goldman Sachs estimated the replacement cost of Covestro’s assets at around €13.9 billion. However, the share has traded below that level for the past two years.

In a note, Citigroup analysts said Covestro’s product portfolio would provide ADNOC with access to end-markets such as electric vehicles, thermal insulation and adhesives, while its cash-generating ability is “a cherry on top of the cake.”

UBS said that buying the plastics producer would help ADNOC reduce its long-term oil and gas exposure as well as benefit from the German firm’s sustainability initiatives. However, synergies would be limited as the Abu Dhabi group produces none of Covestro’s key raw materials, and major cost savings from production or logistics overlaps were unlikely.

Author: Dede Williams, Freelance Journalist