UAE’s Adnoc to Acquire German Chemicals Producer Covestro for $18 Billion in Landmark Deal

Abu Dhabi’s state oil company, Adnoc, has reached an agreement to purchase German chemicals manufacturer Covestro in a deal worth $18 billion (Dh66.11 billion), including debt. Announced on Tuesday, this acquisition represents Adnoc’s largest to date and is one of the biggest foreign takeovers by a Gulf state, as the region continues efforts to diversify its economy away from reliance on oil.

Following months of negotiations, Adnoc will pay 62 euros per Covestro share, amounting to approximately 14.7 billion euros, including 3 billion euros of Covestro’s debt. As part of the agreement, Adnoc will also purchase 1.17 billion euros worth of new shares from Covestro through a capital increase to support the funding of the acquisition.

Covestro’s shares rose by 3.7%, reaching a three-year high of 58 euros following the announcement.

Dr. Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology and CEO of Adnoc, hailed the acquisition as a key strategic move. “This partnership aligns with Adnoc’s smart growth strategy and reinforces our commitment to diversifying our portfolio. Covestro’s expertise in high-tech specialty chemicals and materials, combined with Adnoc’s vision to become a top five global chemicals player, positions us to meet growing global demand and accelerate the transition to a circular economy,” said Al Jaber.

This acquisition is part of Adnoc’s broader international expansion strategy, which focuses on gas, LNG, chemicals, and low-carbon energy. If successfully completed, the deal will significantly boost Adnoc’s position in the global chemicals market.

Adnoc has also been involved in discussions with Austria’s OMV for over a year regarding a potential merger of their petrochemical joint ventures, Borealis and Borouge. Earlier this year, Adnoc acquired a 24.9% stake in OMV from Abu Dhabi’s sovereign fund, Mubadala.

Covestro, a former subsidiary of Bayer, was spun off in 2015. It produces plastics and chemicals for various industries, including automotive, construction, and engineering. The company opened its books to Adnoc in June 2023, following the state oil company’s initial interest.

Under the terms of the deal, Covestro secured several concessions to maintain independence. Half of its supervisory board will continue to be held by labor representatives, and two independent members will remain on the board. Adnoc also committed to not selling or closing Covestro’s operations and pledged to protect its technology and intellectual property.

The acquisition marks the Middle East’s second-largest deal, following Israel’s Teva Pharmaceuticals’ $40 billion acquisition of Allergan’s generic drugs division in 2015. As petrochemical demand is expected to grow by 2% annually until 2050, Adnoc anticipates strong returns from its investment in Covestro.