The UAE's Adnoc has finalized a deal to acquire German chemicals producer Covestro for $18 billion (Dh66.11 billion) including debt, marking the state oil giant's largest acquisition to date. This transaction ranks among the most significant foreign takeovers by a Gulf state, reflecting Abu Dhabi's and other regional nations' efforts to diversify their economies away from heavy reliance on oil amid the global energy transition.
The agreement, which follows extensive negotiations, entails Adnoc paying 62 euros per Covestro share, totaling 14.7 billion euros inclusive of approximately 3 billion euros in debt. Additionally, Adnoc will purchase 1.17 billion euros worth of new shares from a capital increase to facilitate funding for the takeover target. Covestro shares surged 3.7% to reach a three-year high of 58 euros.
Dr. Sultan Ahmed Al Jaber, Minister of Industry and Advanced Technology, Adnoc Managing Director and Group CEO, emphasized that Covestro's expertise in high-tech specialty chemicals and materials, leveraging advanced technologies such as AI, aligns perfectly with Adnoc's strategic goals. This partnership is expected to bolster Adnoc's position as a top global chemicals company, driving long-term value and new growth opportunities while diversifying its portfolio.
This landmark deal signifies a significant shift in Adnoc's international growth strategy, focusing on gas, LNG, chemicals, and low-carbon energies. Upon successful completion, the acquisition will support Adnoc's ambition to become a top five global chemicals player. Adnoc has also been in discussions with Austria's OMV to merge their petrochemical joint ventures Borealis and Borouge, following Adnoc's acquisition of a 24.9% stake in OMV from Abu Dhabi's Mubadala in February.
Covestro, a spin-off from Bayer established in 2015, manufactures plastics and chemicals for the automotive, construction, and engineering sectors. The public takeover offer is contingent upon a minimum acceptance threshold of 50% plus one share of Covestro's capital. The deal may spark discussions about foreign takeovers of Germany's blue-chip companies, especially given the current economic climate. However, Covestro secured wide-ranging concessions to limit Adnoc's control, including maintaining half of the supervisory board seats for labor representatives and ensuring two shareholder representatives remain independent of Adnoc. Adnoc has committed to protecting Covestro's technology and intellectual property and will not sell, close, or significantly reduce its business activities.
Covestro reported a net loss of 72 million euros in the first half of the year, compared to a 46 million euros profit in the previous year. This acquisition is the Middle East's second-largest after Israel's Teva Pharmaceuticals' purchase of Allergan's generic drugs business for around $40 billion in 2015. Petrochemical demand is projected to grow by 2% annually between 2024 and 2050, with the chemicals market expected to double by 2050, offering attractive economic returns.
