Rising energy costs, driven by Russia’s 2022 invasion of Ukraine, have significantly impacted chemical producers, a sector responsible for about five percent of Germany’s GDP.
In a major deal, German plastics maker Covestro has been valued at around 12 billion euros ($13.3 billion), as announced by the company. Abu Dhabi National Oil Company (ADNOC) will offer 62 euros per share to acquire all remaining Covestro stock under an agreement valid until the end of 2028.
ADNOC will also inject approximately 1.2 billion euros into Covestro through the issuance of new shares, once the acquisition is finalized.
Covestro’s CEO, Markus Steilemann, expressed that ADNOC’s involvement would provide the company with a stronger foundation for sustainable growth. He highlighted ADNOC as a “financially strong and long-term oriented partner.”
The offer is subject to regulatory approvals and a minimum acceptance threshold of “50 percent plus one share.”
ADNOC’s bid for Covestro comes while the challenges facing the Germany’s energy-intensive chemicals industry show no signs of abating.
The sector was “struggling in a difficult environment”, the German chemical industry association VCI said in a report last month.
Weak demand and high energy costs in the wake of the Russian invasion of Ukraine were weighing on producers and leading them to cut back on production in Germany.
BASF, the world’s largest chemicals group, said last month would cut costs and refocus on its “core businesses”, while some of its German plants lacked competitiveness.
For its part, Covestro said it was “making significant progress in its strategic transformation”.
The group, which makes chemicals used in everything from building insulation to electric vehicles, unveiled savings plan in June amid ongoing takeover talks with ADNOC.
Leverkusen-based Covestro, which was spun off from chemicals giant Bayer in 2015, said it would cut material and personal costs in the hopes of saving some 400 million euros annually.
With ADNOC’s support, Covestro could grow in “highly attractive sectors and can make an even greater contribution to the green transformation”, Steilemann said.
Covestro’s board said it would recommend shareholders accept ADNOC’s offer under the terms of the agreement.
The acquisition of Covestro is a significant win for ADNOC as it aims to diversify beyond oil and venture into new sectors. If finalized, it would mark the first takeover of a company listed on Germany’s blue-chip DAX index by a Gulf state-owned firm.
ADNOC’s CEO, Sultan Al Jaber, called Covestro a “natural fit” for the company’s growth strategy. He emphasized that the deal supports ADNOC’s goal of diversifying its portfolio and becoming a top-five global chemicals company.
Al Jaber, who also presided over last year’s COP28 climate summit in Dubai, highlighted the acquisition as part of ADNOC’s future-proofing strategy.
Covestro noted that ADNOC had committed to upholding its corporate governance and business structure. Additionally, ADNOC has assured that existing agreements with workers’ unions will be respected, and there are no plans to sell, close, or significantly reduce Covestro’s operations.
