For those who see Germany in decline, the imminent takeover of Covestro by Adnoc is the smoking gun – the sell-off of German industry is becoming a reality. But the matter is not quite that simple. The state-owned oil and gas company from Abu Dhabi would certainly not be the worst option for securing the future of the plastics group and its employees.

Of course, it is regrettable when a German flagship company, and one in the blue-chip DAX index at that, virtually disappears from the public eye. However, there are certainly positive aspects to the takeover, especially as the advance of oil rich Middle Easter companies illustrates that Germany's attractiveness as an investment location is not as bad as is often insinuated.

Although Covestro is a global company, almost 40% of its employees still work in Germany. The proportion of sales generated in Europe in 2023 was comparable. And even though the Leverkusen-based company has just launched a new cost-cutting programme, almost half of which is attributable to the domestic market, a job security pact was concluded at the same time. There will be no compulsory redundancies until 2032, i.e. for eight years. An agreement to which the potential new owner would also be bound.

The savings programme is neither a concession to the new investor nor a defensive manoeuvre. Even without Adnoc, Covestro would have made cuts, following the example of BASF, Evonik, Lanxess & Co. The general conditions for the chemical industry have changed drastically since the outbreak of the war in Ukraine. Energy prices from the days when Russia was supplying cheap pipeline gas are not coming back anytime soon. The domestic electricity prices paid by industry are not even competitive at European level. These are facts that cannot be argued away.

Those who can – and Covestro would undoubtedly be in a position to do so due to its size, global footprint and market position – are relocating production abroad. However, Covestro in particular, has been one of the industrial groups in recent years that has deliberately stuck to its base in Germany. It goes without saying that this can only succeed with a willingness to change. This is not only expected by a new owner, but was also expected by the existing shareholders.

With a Middle Eastern investor sitting on state coffers filled with petrodollars, it should also be easier for Covestro to realise long-cherished investment projects more quickly, and essentially independently of the economic cycle. With its complete focus on the circular economy, Covestro has a convincing strategy.

Of course, for a chemical company whose products are based on well over 90% crude oil-based raw materials, it is a long way to climate neutrality. However, the rich oil countries of the Middle East have been following sustainability efforts with interest for some time now, as they are looking for diversification opportunities as long as revenues from oil and gas wells are still flowing. Above all, the chemical industry is an attractive field of activity for them, which serves to extend their own value chain.

Nobody should, therefore, believe that Adnoc is merely taking advantage of the economic situation to hunt for bargains in this country. The investors from the Emirates are strategically on the move and evaluate takeover targets regardless of the cycle. The 62 euros offered corresponds to a premium of 54% on the unaffected share price before the first takeover rumours emerged. More importantly, since the IPO in 2015, Covestro has only traded above the indicative offer price between October 2016 and October 2018. Shareholders should, therefore, beware of exaggerated price expectations. Adnoc will not pay fantasy prices.