Abu Dhabi’s state-owned oil firm, ADNOC, has agreed to acquire German chemical giant Covestro for €14.7 billion ($16.4 billion), marking a significant move in ADNOC’s international growth strategy.
The 62 euros-a-share cash deal will also see ADNOC take on about 3 billion euros in debt. With this deal, ADNOC aims to grow in petrochemicals along with gas and renewable energy.
ADNOC’s bid for global expansion
ADNOC’s latest acquisition forms part of its broader strategy to diversify its operations beyond oil, emphasizing chemicals and advanced materials.
Covestro, known for its high-tech polymers and materials used in industries like construction, sports, and telecommunications, provides ADNOC with an opportunity to leverage advanced technologies, including AI, for further innovation.
This acquisition follows ADNOC’s 24.9% stake purchase in Austrian chemicals firm OMV and its majority stake in Fertiglobe, reinforcing its commitment to expanding its chemical portfolio.
Covestro’s inclusion in ADNOC’s portfolio allows the UAE-based oil giant to tap into specialized polymer markets, where Covestro has been a leader.
The German firm produces materials critical for engineering, construction, and the chemical industries.
ADNOC injects €1.17 billion in new equity capital
Along with the acquisition, ADNOC has committed to providing €1.17 billion in new equity capital for Covestro, aimed at accelerating its future growth and innovation initiatives.
This investment not only boosts Covestro’s balance sheet but also helps integrate it into ADNOC’s ambitious global chemical expansion plans.
The capital injection is expected to further support Covestro’s development of advanced, AI-enhanced materials, making it a cornerstone in ADNOC’s internationalization efforts.
Despite the large scale of the acquisition, analysts at Jefferies expect few antitrust or regulatory challenges.
Covestro and ADNOC operate in distinct markets with limited overlap, which could facilitate a smoother approval process from European and other global regulators.
The transaction also highlights the increasing interest of Middle Eastern companies in European assets, particularly in the energy and chemicals sectors.
What does the ADNOC-Covestro deal signal?
ADNOC’s €14.7 billion acquisition of Covestro is one of the largest investments by a Middle Eastern firm in a German DAX-listed company, marking a trend of increasing cross-border investment.
Covestro’s leadership expects the acquisition to accelerate the firm’s sustainable growth strategy, particularly in the face of global economic challenges.
As ADNOC integrates Covestro into its portfolio, the combined firm will likely focus on expanding its presence in markets driven by advanced materials and cutting-edge technologies.
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