BY Richard Summerfield
Abu Dhabi’s state-owned oil firm, Abu Dhabi National Oil Company (ADNOC), has agreed to acquire German chemicals firm Covestro for $16.4bn. The deal comes as ADNOC begins to diversify amid the volatility of oil markets.
To acquire Covestro, ADNOC will offer €62 per share. This represents a 54 percent premium over Covestro’s stock price before initial speculation about a potential deal began in June 2023, and a 21 percent premium to the closing price on 23 June 2024, the last share price prior to Covestro announcing the beginning of the confirmatory due diligence and the start of concrete negotiations. The transaction will be financed through ADNOC’s available cash.
According to ADNOC, the transaction is key to the firm’s international growth strategy as it aims to become a top-five chemicals player globally. A former unit of Bayer, Covestro manufactures polymer materials for construction and engineering processes. Its products are used in sectors such as sports and telecommunications, as well as in the chemical industry.
The deal also saw ADNOC sign an investment agreement under which it pledged to provide additional funding by buying €1.17bn worth of new Covestro shares from a capital increase at an offer price of €62, which Covestro will use to foster the further implementation of its growth strategy.
“We are convinced that the agreement reached today with ADNOC International is in the best interest of Covestro, our employees, our shareholders, and all other stakeholders,” said Markus Steilemann, chief executive of Covestro. “With ADNOC International’s support, we will have an even stronger foundation for sustainable growth in highly attractive sectors and can make an even greater contribution to the green transformation. We regard ADNOC International as a financially strong and long-term oriented partner with whom we will further drive our successful ‘Sustainable Future’ strategy in all market conditions. Our complementary growth strategies, shared commitment to advanced technologies, innovation and sustainability are key cornerstones of our partnership.”
“As a global leader and industrial pioneer in chemicals, Covestro brings unmatched expertise in high-tech specialty chemicals and materials, using advanced technologies including AI,” said Sultan Ahmed Al Jaber, managing director and group chief executive of ADNOC. “This strategic partnership is a natural fit and aligns seamlessly with ADNOC’s ongoing smart growth and future proofing strategy and our vision to become a top 5 global chemicals company. It represents a pivotal step for both organizations and embodies our disciplined approach to investing in strategic assets that drive long-term value and unlock new growth opportunities, while reinforcing our commitment to diversifying ADNOC’s portfolio. Our aligned strategies uniquely position us to meet the growing global demand for energy and chemical products, while accelerating the transition to a circular economy.”
News: Abu Dhabi's ADNOC to buy German chemicals firm Covestro for $16 bln