In a significant move, the United Arab Emirates’ (UAE) oil giant Adnoc has agreed to acquire German chemicals producer Covestro for $18 billion, including debt, making it the largest acquisition for Adnoc to date. This acquisition reflects the ongoing efforts of Gulf states, including Abu Dhabi, to diversify their economies from a heavy reliance on oil in response to the global energy transition.
The deal, which follows lengthy negotiations between the two companies, involves Adnoc paying 62 euros per Covestro share, totaling 14.7 billion euros, with an additional 3 billion euros in debt. Adnoc will also purchase 1.17 billion euros worth of new shares in Covestro to enhance the funding for the acquisition.
As a former Bayer unit, Covestro specializes in the production of high-tech specialty chemicals and materials, utilizing advanced technologies such as artificial intelligence (AI). Adnoc’s Minister of Industry and Advanced Technology, Dr. Sultan Ahmed Al Jaber, highlighted the strategic importance of this partnership in aligning with Adnoc’s growth and future-proofing strategy, aiming to become a top global chemicals company.
This landmark agreement underlines Adnoc’s international growth strategy, focusing on gas, LNG, chemicals, and low-carbon energies, in line with the Board’s strategic objectives. The acquisition of Covestro will support Adnoc’s ambition to become a leading global player in the chemicals industry, contributing to its overall portfolio diversification efforts.
Furthermore, Adnoc has been engaged in discussions with Austria’s OMV to merge their petrochemical joint ventures, Borealis and Borouge, showcasing Adnoc’s commitment to expanding its presence in the chemicals sector. The public takeover offer for Covestro will be subject to a minimum acceptance threshold of 50% plus one share of Covestro’s capital, ensuring shareholder approval.
Covestro has secured wide-ranging concessions to limit the control of the company by Adnoc, including retaining half of the seats on its supervisory board for labor representatives and maintaining independent board members. Additionally, Adnoc has committed to safeguarding Covestro’s technology and intellectual property, ensuring the continuity of the management board’s responsibilities over strategic decisions.
Despite Covestro reporting a net loss in the first six months of the year, the acquisition presents a strategic opportunity for Adnoc to capitalize on the anticipated growth in the petrochemical industry. With a projected compound annual growth rate of 2% in petrochemical demand between 2024 and 2050, the chemicals market is poised to double by 2050, offering attractive economic prospects for Adnoc.
In conclusion, the acquisition of Covestro by Adnoc marks a significant milestone in the UAE’s efforts to diversify its economy and expand its footprint in the global chemicals market. With a focus on innovation, technology, and sustainable growth, this strategic partnership between Adnoc and Covestro is poised to drive long-term value creation and unlock new growth opportunities, positioning Adnoc as a key player in the international chemicals industry.
