Adnoc to acquire Germany’s Covestro for $16 billion to become global chemicals major

An Adnoc subsidiary has agreed to buy German chemicals maker Covestro for an enterprise value of €14.7 billion ($16.34 billion) as the Abu Dhabi-based energy company grows to become a major player in the chemicals industry.

Adnoc International will offer Covestro shareholders cash consideration of €62 per share, which represents a premium of 54 per cent to the unaffected closing share price of Covestro on June 19, 2023, the day before the first market rumours regarding a potential transaction, the company said in a statement on Tuesday. The offer price is 7 per cent higher than Covestro's current stock price of €58 on the Frankfurt Stock Exchange.

Adnoc International said it agreed to provide additional funding to Covestro by purchasing 10 per cent of its newly issued shares at the offer price, which will provide Covestro with €1.17 billion.

Adnoc's acquisition of Covestro is the UAE's largest cross-border deal and the biggest foreign direct investment into Germany in the past five years.

“The transaction is a key pillar of Adnoc International’s growth strategy to become a top five global chemicals player,” the company said.

“As a global leader and industrial pioneer in chemicals, Covestro brings unmatched expertise in high-tech speciality chemicals and materials, using advanced technologies, including AI,” said Dr Sultan Al Jaber, Managing Director and Group Chief Executive of Adnoc.

“It represents a pivotal step for both organisations and embodies our disciplined approach to investing in strategic assets that drive long-term value and unlock new growth opportunities,” said Dr Al Jaber, also the Minister of Industry and Advanced Technology.

Leverkusen-based Covestro is one of the world’s largest manufacturers of high-quality polymer materials and their components. It reported earnings before interest, taxes, depreciation and amortisation of €320 million in the second quarter of this year, which was down about 17 per cent from the same period a year earlier.

The company lowered its EBITDA forecast for the full-year 2024, citing a challenging economic environment. It expects its core earnings to be in the range of €1 billion and €1.4 billion, down from a previous estimate of €1.6 billion.

“Covestro welcomes and supports the takeover offer,” Adnoc International said.

“We are convinced that the agreement reached today with Adnoc International is in the best interests of Covestro, our employees, our shareholders and all other stakeholders,” said Markus Steilemann, chief executive of Covestro. “We regard Adnoc International as a financially strong and long-term orientated partner … our complementary growth strategies, shared commitment to advanced technologies, innovation and sustainability are key cornerstones of our partnership.”

India’s Reliance Industries, which has previously partnered with Adnoc in the energy and petrochemicals sectors, said the potential Covestro acquisition would strengthen the Abu Dhabi company’s core capabilities.

“At Reliance, we look forward to seeing the positive impact that this transaction brings to the market, industry and to Covestro's future growth,” the company, which is led by Indian billionaire Mukesh Ambani, said in a post on X.

Sigmar Gabriel, chairman of the Atlantik-Brücke, a non-profit association that aims to deepen co-operation between Germany and the US, said the transaction is a sign of trust and proof of the appeal of Germany as a business location.

“As a strong partner, the Adnoc Group can noticeably advance Covestro in its transformation,” he said in a post on X.

Sebastian Kurz, former Austrian leader, said in a post on X: “Congratulations to Dr Sultan Al Jaber and Adnoc Group on reaching this significant milestone.”