Covestro, taken over by Adnoc for 11.7 billion euros

Oil giant Abu Dhabi National Oil Co. (Adnoc) has reached an agreement of around 11.7 billion euros ($13 billion) to acquire German chemicals maker Covestro AG, in a deal that will be the largest acquisition of a European firm by a single buyer from the Middle East, according to Bloomberg. The deal will also be Adnoc's largest ever acquisition, giving it control of a major European industrial company with roots in the 19th century.

Adnoc and Covestro said the deal values the German group at 62 euros per share, but depends on the Abu Dhabi-based company obtaining 50% plus one share in the takeover offer. Adnoc will also participate in a capital increase, as a result of which Covestro will obtain new capital worth approximately one billion euros.

The price of the Adnoc - Covestro deal represents an 11% premium to the German company's share price at the close of trading on Monday, as well as a 54% premium to the share price on June 19, 2023, the last trading session before Bloomberg News to announce the potential transaction.

In recent months, Adnoc CEO Sultan Al Jaber has been looking to make acquisitions globally, with the company having large oil revenues at its disposal. In recent months, Adnoc bought shares in gas projects in the USA and Mozambique.

The Covestro takeover comes more than a year after negotiations began, with Adnoc first proposing 55 euros per share and increasing the offer several times, according to Bloomberg News.

"From the beginning, this transaction seemed to fall into the "when, not if' category. The business is deeply strategic for both parties - both from a corporate and political perspective", consider the specialists of the consulting firm MKP Advisors.

Adnoc announced that it will finance the takeover with available cash.

According to Reuters, Austrian oil and gas company OMV AG is in talks for a $30 billion merger between petrochemical group Borealis (owned by OMV and Adnoc) and Abu Dhabi-listed Borouge (owned by Adnoc and Borealis). In June, the general director of OMV, Alfred Stern, said that the negotiations will continue and there is no deadline for their completion.

In February, Adnoc completed the acquisition of a 24.9% stake in OMV, an agreement agreed in December 2022, increasing its holdings in Borealis and Borouge.

• Covestro, on losses

Covestro, which produces plastics and chemicals for the automotive, construction and engineering sectors, was created in 2015 after being spun off from Bayer AG. The company reported at the end of July a net loss of 72 million euros for the first six months of the current year, compared with a profit of 46 million euros in the first half of the previous year.

In this context, Markus Steilemann, CEO of Covestro, stated: "The market environment remains very challenging. The sudden increase in the volumes we have sold shows that we are ready for the market recovery. In addition, our STRONG transformation program creates the necessary conditions for us to further expand our leadership position in the global market and ensure our competitiveness."

Group-wide EBITDA fell by 16.9% in the first half to EUR 320 million.