German speciality chemicals company Covestro has signed an investment agreement with entities of Adnoc, including Adnoc International and its subsidiary, Adnoc International Germany Holding.

Adnoc's acquisition of Covestro drives sustainability, innovation, and circular economy ambitions forward. Source: European Coatings

At the beginning of October, the long-standing speculation in the coatings industry became reality: Adnoc is close to acquiring Covestro. Adnoc, the Abu Dhabi National Oil Company, is a state-owned energy company based in the United Arab Emirates. According to several news outlets the oil company has been seeking to diversify to reduce its dependence on revenue generated with oil for a while now.

The first reports about Adnoc¡¯s interest in acquiring Covestro already emerged last year in June. By September 2023, Covestro confirmed that it was engaged in ¡°open-ended discussions¡± with Adnoc. Last month, the speciality chemicals manufacturer signed an investment agreement with certain entities of the Adnoc, including Adnoc International and its subsidiary, Adnoc International Germany Holding. Adnoc¡¯s Managing Director and Group CEO, HE

Dr Sultan Ahmed Al Jaber, remarked: ¡°This agreement aligns with our ambition to become a top global chemicals company while contributing to the transition to a circular economy. ¡±

Offer supported by Covestro

The offer will be subject to a minimum acceptance level of 50 per cent plus one share and customary closing conditions. Covestro¡¯s Board of Management and Supervisory Board have welcomed and supported the offer. Subject to the review of the offer document, both boards currently expect to recommend shareholders to accept the offer.

Dr Markus Steilemann, Covestro¡¯s CEO, commented on the day of the deal: ¡°We are convinced that the agreement reached today with Adnoc International is in the best interest of Covestro, our employees, our shareholders, and all other stakeholders. We regard Adnoc International as a financially strong and long-term oriented partner with whom we will further drive our successful ¡°Sustainable Future¡± strategy in all market conditions.¡± The CEO also stated to CNBC International News: ¡°This is at least to my knowledge the largest deal that has or is about to happen potentially between a strategic investor from the Middle East and a German Dax-listed company so this is unprecedented which means we put quality before time.¡±

A strategic fit

¡°Covestro chose to partner with Adnoc because it is a strong, long-term partner that aligns with Covestro¡¯s ¡°Sustainable Future¡± strategy¡±, said a spokesperson for the company to the European Coatings Journal. ¡°The partnership leverages complementary growth strategies and a shared focus on sustainability, innovation, and advanced technologies. Adnoc aim to become a top global chemicals company matches Covestro¡¯s circular economy ambitions, making it a strategic fit.¡±
Adnoc has assured there will be no significant reduction in Covestro¡¯s business activities, nor any sale or closure of its operations as part of this transaction. Furthermore, the agreement also guarantees the protection of Covestro¡¯s intellectual property and technology. The spokesperson for Covestro stated: ¡°The commitments to governance and intellectual property protection ensure ongoing stability. Long-term, the partnership enables Covestro to expand sustainable growth, access high-growth markets, and strengthen its position in speciality chemicals.¡±

Increasing the share capital

Adnoc International has committed to fully backing Covestro¡¯s ¡°Sustainable Future¡± strategy. ¡°With Adnoc¡¯s support, Covestro can increase its investments in sustainable and innovative technologies, which are crucial for maintaining its competitive position in high-tech speciality materials¡±, said the spokesperson. ¡°The collaboration opens new opportunities for Covestro to capitalise on Adnoc¡¯s resources and global reach, enabling the company to expand its market share in the coatings and speciality chemicals sectors while supporting the transition towards more sustainable and circular products.¡± An increase in share capital plays a major role here. Following the transaction, Covestro¡¯s Board of Management and Supervisory Board have agreed to increase the company¡¯s share capital by 10% (equivalent to 18.9 million shares). These new shares will be issued to Adnoc at the offer price of EUR 62.00 per share, amounting to approximately EUR 1.17 billion. The issuance will occur without subscription rights, in line with simplified procedures. ¡°This offer also represents a 54% premium on the share price as of June 19, 2023, implying an equity value for Covestro of approximately EUR 11.7 billion¡±, explained Covestro¡¯s spokesperson. ¡°More-over, Adnoc¡¯s commitment to maintaining governance ensures stability during the transition.¡±

The complete issue is now also available at our data bank European Coatings 360. European Coatings 360¡ã provides registered users with the opportunity to conduct your research activities online via our quick and effective full-text search.

Investing in circular economy

Covestro has also recently already announced that it is investing EUR 100 million over the next three years to enhance its global research and development infrastructure, focusing on sustainable technologies and digitalisation to promote a fully circular economy. Key initiatives include modernising labs and pilot plants, implementing high-performance computing to accelerate chemical process simulations, and advancing chemical recycling technologies. The company is also upgrading several facilities located in Leverkusen, Shanghai, and
Pittsburgh.