After more than a year, Middle Eastern oil giant ADNOC finally acquired Germany chemical giant Covestro. On October 1, Covestro announced that it has signed an investment agreement with an entity within the ADNOC Group.
ADNOC will acquire all the issued shares of Covestro at a price of EUR 62 per share, corresponding to a total value of approximately EUR 11.7 billion. As part of the investment agreement, which is valid until the end of 2028, ADNOC will provide significant support for Covestro's "Sustainable Future" strategy and strategic development. If the transaction closes, Covestro's share capital will increase by 10 percent: Covestro will receive an additional share capital of EUR 1.17 billion at the offer price of EUR 62 per share.
As a result, the total value of the transaction is as high as 12.87 billion euros, making it the largest M&A case in Europe this year. In addition, the acquisition includes €3 billion in debt for a total transaction value of €14.7 billion.
Covestro CEO Dr. Steilemann "The agreement with ADNOC is in the best interests of Covestro, our employees, shareholders and all other stakeholders. Sultan Ahmed Al Jaber, Managing Director and Group CEO of ADNOC, said, "This strategic partnership is a match made in heaven and aligns with ADNOC's future-oriented sustainable growth strategy and our vision to become one of the world's top five chemical companies." “
The two companies have been negotiating the acquisition agreement for more than a year, starting with an initial unofficial offer of EUR 55 per share from June 2023 to EUR 14.4 billion in September 2023 when ANDOC raised the offer to EUR 14.4 billion. (Recommended reading: "Covestro wants to sell itself?") Middle Eastern tycoons offer 11.7 billion euros to create the largest acquisition in Europe this year"; "The offer of the Middle East tyrant has been raised to 14.4 billion euros! Covestro's acquisition may set a new record for mergers and acquisitions")
It is understood that the offer price is 54% higher than the share price of Covestro on June 19, 2023 (the day before ADNOC first proposed a possible acquisition), and 21% higher than the closing price before the start of formal negotiations on June 23, 2024.
The company's coordinated strategy will enable the two companies to better meet the growing global demand for energy and chemical products and accelerate the transition to a circular economy.
In the investment agreement, ADNOC committed that Covestro would continue to be managed as a joint-stock company and would not enter into any control and/or profit or loss transfer agreements with Covestro. In addition, there are no plans in the agreement to sell, close or significantly reduce Covestro's business activities as part of the transaction, and ADNOC has committed not to take any of these actions.
Covestro said it is fully pivoting to a sustainable economy, looking to reduce costs and avoid layoffs while maintaining operational independence, while increasing investment in emissions reduction targets. As a Middle East oil giant, ADNOC is reported to have nearly $150 billion in funds on hand for investment, and the company is also transforming into a clean energy supplier, in recent years, it has successively acquired shares in many energy companies such as OMV and NextDecade, and allocated $23 billion to promote low-carbon solutions. From a sustainability perspective, this acquisition is even more significant.
As Sultan Ahmed Al Jaber said, "This is a crucial step for both parties. ”
Looking to the future, by including Covestro, ADNOC will not only be able to extend the industrial chain from the traditional energy field to the chemical field, but also make full use of Covestro's technological advantages and market channels to further enhance its comprehensive competitiveness. For Covestro, with the strong support of ADNOC, it will inject new vitality into its future development, and the company may usher in new development opportunities and business expansion space.