(Bloomberg) -- Covestro AG has rejected an initial takeover proposal from Abu Dhabi National Oil Co. as too low, people familiar with the matter said.

The German plastics firm told Adnoc Chief Executive Officer Sultan Al Jaber in a letter Thursday that the proposed valuation doesn’t provide ground for further talks, according to the people, who asked not to be identified discussing confidential information. It also raised the question of whether Adnoc would be the best owner for some of Covestro’s assets, they said.

Covestro could be open to discussing a deal if it were offered better terms, the people said. In a recent meeting with Covestro leadership, Al Jaber had proposed a potential bid in the mid-€50s per share, which would value the company at nearly €11 billion ($12 billion), people with knowledge of the matter have said.

A bid of roughly €55 per share would be almost 40% above Covestro’s recent trading price, in line with the premiums typically offered for listed German companies. Still, refusing a first offer isn’t unusual. Some research analysts have given the company a target price as high as €64, data compiled by Bloomberg show. 

Covestro shares jumped as much as 3.7% on Thursday, hitting the highest intraday level in almost three months. They were up 1.8% at 12:58 p.m. in Frankfurt, giving the company a market value of €9.3 billion.

Adnoc will assess Covestro’s response before deciding its next steps, the people said. Representatives for Covestro and Adnoc declined to comment. 

Adnoc pumps almost all the oil in the United Arab Emirates, which is a member of OPEC. Its CEO, Al Jaber, is also president of the COP28 climate change conference. He’s been seeking to transform Adnoc and diversify the company away from petrochemicals. 

Goldman Sachs Group Inc. analysts said the replacement cost of Covestro assets could be around €13.9 billion, even without considering potential synergies for a strategic buyer. The stock has failed to reach that level in the public equity markets since July 2021, analysts including Georgina Fraser wrote in a June 20 research report. 

Covestro’s product portfolio provides access to end markets including electric vehicles, thermal insulation and adhesives, and its cash-generating ability is “a cherry on top of the cake,” Citigroup Inc. wrote in a research note this week.  

UBS Group AG wrote in a research report that Covestro would help Adnoc reduce its long-term oil and gas exposure as well as benefit from Covestro’s sustainability initiatives. Still, synergies would be limited as Adnoc isn’t a big producer of Covestro’s key raw materials, and major cost savings from production or logistics overlaps are unlikely, according to the report.

--With assistance from William Wilkes, Alexandra Muller, James Cone and Joel Leon.

(Updates with share move in fifth paragraph.)

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