Adnoc to Buy Covestro for €12 Billion in Its Biggest Deal
(Bloomberg) – Abu Dhabi National Oil Co. reached a deal to buy chemical producer Covestro AG for about €11.7 billion ($13 billion), in what’s set to be the biggest Middle Eastern acquisition of a European firm.
The takeover will value the German company at €62 per share and hinges on the Abu Dhabi oil producer receiving at least 50% plus one share in its tender offer, Adnoc and Covestro said. The deal would be Adnoc’s largest acquisition and give it control over a strategic European industrial company with roots going back to the 19th century.
The Abu Dhabi energy giant’s Chief Executive Officer Sultan Al Jaber has been scouring for acquisitions worldwide. Armed with vast oil revenue, Adnoc has turned into one of the world’s most active energy dealmakers, picking up stakes in gas projects in the US and Mozambique in recent months. Chemicals are a big part of that push as it sees opportunities in products used to make plastics, while the energy transition slows oil demand growth.
The deal for Covestro comes more than a year after talks first started, with Adnoc initially offering €55 per share and bumping it higher several times, Bloomberg News has reported. The agreed offer represents about an 11% premium to Covestro’s closing price of Monday as well as a 54% premium that on June 19, 2023, the last full trading day before Bloomberg News revealed Adnoc’s initial approach.
“What we believe in Covestro is that their strategy and ours dovetail really well,” Khaled Salmeen, head of Adnoc’s downstream division, said in a Bloomberg TV interview. “That took time to make sure that we built the trust and we built the common vision about how we see the future.”
Covestro’s shares jumped as much as 4% on Tuesday, and were at 58.06 euros apiece as of 3:14 pm in German trading. The company’s management and supervisory boards support Adnoc’s offer.
“From the outset this transaction seems to fall into the ‘when, not if’ category, it is so deeply strategic for both sides — both from a corporate and a political perspective,” advisory firm MKP Advisors said in a note. The transaction is “highly likely to close,” it said.
As part of the deal, post-completion Adnoc will subscribe to a capital increase that will give Covestro about €1.2 billion of fresh capital. The UAE company also doesn’t plan a so-called domination agreement that can give acquirers wide-ranging control of a German target. It signaled it could delist Covestro or squeeze out minority shareholders in the future.
Adnoc said it will finance the takeover with available cash.
Morgan Stanley advised Adnoc on the deal. Goldman Sachs Group Inc. and Perella Weinberg Partners worked with Covestro’s management board, while the supervisory board tapped Rothschild & Co. and Macquarie Group Ltd. for advice.
(Updates with Adnoc executive comments in the fifth paragraph.)
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