Covestro to slash costs by EUR400 mn by 2028; in process for takeover by Adnoc

German materials firm Covestro says in view of a rapidly changing market environment, it has launched a global transformation programme known as Strong and by the end of 2028, plans to achieve annual global savings of EUR400 million in material and personnel costs. Almost EUR190 million of these will be in its home country of Germany.

Already, the firm cut almost 500 jobs last year and closed some of its businesses, especially since the energy crisis hit Europe after Russia’s invasion of Ukraine.

Thus, Covestro says it is working continuously to further improve existing structures and processes. This includes making production, administrative units and other areas as efficient as possible and continuously expanding the innovation pipeline. Covestro thereby continues the successful implementation of its strategy, it adds.

Initial cost savings have already been initiated. Covestro is also driving forward the use of Artificial Intelligence (AI) to continue increasing efficiency and productivity in the future.

Dr. Markus Steilemann, CEO of Covestro says: “The last few years have been challenging for the chemical industry and for Covestro. Despite all the challenges, we have continued to drive forward our 'Sustainable Future' strategy.”

Meanwhile, the company has also announced it has begun concrete negotiations on a possible takeover by energy firm Abu Dhabi oil company (Adnoc) that would value its equity at EUR11 billion.

The company has said that “based on the open-ended talks held so far with Adnoc the Board of Management of Covestro after consultation with the Supervisory Board has today decided to enter into concrete negotiations with Adnoc regarding a potential transaction and the potential conclusion of an investment agreement as well as to allow for an adequate exchange of company information to confirm assumptions (confirmatory due diligence)”.

It also said that the discussions so far have shown that Covestro and Adnoc can generally reach a common understanding regarding core aspects of a possible transaction including support for Covestro’s further growth strategy.

Adnoc has made a offer price of EUR62 per Covestro share. It had previously made an offer of EUR60 per share, with talks having started in 2023 and Covestro having declined that offer.

”We have made good progress in our discussions with Adnoc. Therefore, we have decided to enter into concrete transaction negotiations with Adnoc,” Steilemann added.

Adnoc and Covestro both intend to proceed with the negotiations about a potential transaction and the confirmatory due diligence in a timely manner. At this time, there is no certainty whether the upcoming negotiations will lead to an agreement. There is also no certainty as to the final terms of any such agreement.

Any potential transaction would, in addition to mutual agreement on the commercial and legal transaction parameters, among other things, be subject to the approval of the respective boards of the parties and clearance by the competent authorities, it adds.

Meanwhile, Adnoc has been pursuing a series of European targets. It has also been in talks with Austria’s OMV to create a chemicals giant with combined annual sales of more than US$20 billion.

In December, it agreed to buy European chemical producer OCI’s stake in ammonia and urea producer Fertiglobe for US$3.6 billion. Reuters reported in April that it had for a while considered buying UK oil giant BP.

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