In the energy giant’s largest-ever acquisition, Abu Dhabi’s ADNOC has agreed to purchase German chemicals manufacturer Covestro (1COV.DE) for 14.7 billion euros ($16.3 billion), including debt.
The purchase is one of the largest foreign takeovers by a Gulf state as countries in the area aim to minimize their dependence on oil amid the global turn to renewable energy.
Additionally, it occurs during a delicate period for foreign acquisitions in Germany, when the government and Commerzbank are attempting to stave off interest from Italy’s UniCredit in the bank.Following lengthy discussions, the 62 euros per share cash deal is a cornerstone of the energy giant’s goal to grow in petrochemicals along with gas and renewable energy. It will also see ADNOC take on nearly 3 billion euros in debt.
ADNOC announced that in addition to purchasing 1.17 billion euros worth of additional Covestro shares upon the closing of the sale, it will also launch a new manufacturing unit and enhance funding at the former Bayer (BAYGn.DE).Khaled Salmeen, ADNOC’s head of downstream, marketing, and trade, told Reuters, “We feel that the fundamentals of chemicals are robust.” He also added that he saw Covestro as a foundation for expansion.
“From now until 2050, this sector—and specifically, Covestro’s place in it—will grow faster than GDP,” he continued.
Covestro is a company that produces chemicals and plastics for the engineering, construction, and automotive industries. Its shares increased 3.7% to 58 euros, their three-year high.Additionally, ADNOC and OMV of Austria have been in discussions to combine their joint ventures for petrochemicals, Borealis and Borouge. In February, Abu Dhabi sovereign firm Mubadala sold a 24.9% share in OMV to ADNOC.
In 2015, Covestro was established subsequent to its separation from Bayer. A year after news of ADNOC’s first interest surfaced, in June, it opened its books to ADNOC.
A minimum acceptance criteria of 50% plus one share of Covestro’s stock will apply to the buyout offer.”Covestro and the stockholders have benefited from the drawn-out talks. One of the top-15 shareholders of Covestro, Arne Rautenberg, is a fund manager at Union Investment and believes the acquisition is well-structured and now has a high chance of closing.
LIMITS ON MANAGEMENT
The transaction may fuel discussions in Germany concerning foreign acquisitions of well-known brands in the midst of a faltering economy.
Nonetheless, ADNOC gave Covestro significant autonomy.
According to Covestro, two of the shareholder representatives on the board will be independent of ADNOC, and labor representatives will retain half of the seats on the supervisory board, as is customary for German listed firms.
ADNOC promised to safeguard Covestro’s technology and intellectual property and not to sell, shut down, or drastically scale back the company’s operations, according to Covestro.
The CEO of Covestro, Markus Steilemann, told Reuters that he intended to fulfill his contract, which runs until 2028, and that the German business said that its management board would continue to be in charge of management and strategic direction.
“I think that this is a wise move that will not only
