Takeover fantasies send the shares of plastics group Covestro soaring.

The shares rose by more than four percent to EUR 53.66 at the peak on Monday and were the biggest winner in the leading Dax index. Over the course of the day, they traded around 2.5 percent higher, having already gained almost eight percent at the end of the week. On Friday, Covestro confirmed the start of open-ended talks with Abu Dhabi's state-owned oil company Adnoc, which is interested in acquiring the Leverkusen-based company.

"It is very pleasing that Covestro has now entered into negotiations with Adnoc. This is a good sign and shows that Covestro's management is acting in the interests of the owners," fund manager Arne Rautenberg from the fund company Union Investment told the news agency Reuters. "The task now is to evaluate the offer price as well as the strategic orientation, site guarantees, etc." The fund company, which is one of Covestro's 20 largest shareholders, together with another major shareholder - who wished to remain anonymous - had called for formal talks between the two companies at the end of August.

Adnoc's interest in Covestro was first leaked in June. At that time, according to insiders, the oil giant from the United Arab Emirates (UAE) initially made an informal offer of EUR 55 per Covestro share. In July, Adnoc then offered EUR 57 per share, but this did not go down well with Covestro. The oil company recently signaled a possible further increase to EUR 60 per share. The deal would have a volume of around 11.6 billion euros. Many observers on the stock exchange were skeptical as to whether a formal offer would actually be made, but analysts had seen EUR 60 per share as a possible starting point for talks. Covestro had not previously commented on the takeover interest.

Covestro management emphasized on Friday that whether, in what form and possibly on what terms an agreement would be reached was open and would depend on the course of the upcoming talks. Analyst Markus Mayer from Baader Helvea assumes a takeover probability of 30 percent with a potential purchase price of EUR 70 per share. "Friday's news could increase this probability." In the talks, Covestro intends to focus primarily on the further implementation of its strategy, including corresponding regulations on corporate governance.

According to the Rheinische Post, the IG BCE trade union is insisting on job security. "For the Covestro employee representatives and the IG BCE, it is crucial that the Group is now made sustainably fit for the future. This applies above all to sites and employment," the newspaper quoted a spokesperson as saying in its Monday edition. Around 7300 Covestro employees in Germany are protected from compulsory redundancies until the end of 2028. Worldwide, there are around 18,000 employees.

Covestro is the former plastics subsidiary of Bayer, which the Leverkusen-based company floated on the stock exchange in 2015. A takeover of Covestro would give the oil company Adnoc, which also manufactures refinery and petrochemical products, access to more advanced materials used in electric vehicles, thermal insulation for buildings, coatings, adhesives and engineering plastics. CEO Sultan al-Jaber is leading the company's push into new energies, low-carbon fuels such as ammonia and hydrogen, as well as liquefied natural gas and chemicals.

(Report by Patricia Weiß, with assistance from Andrey Sychev and Stefanie Geiger, edited by Ralf Banser. If you have any questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).