German chemicals firm Covestro to be acquired by Abu Dhabi's ADNOC for $16.4 billion.

• On Tuesday, ADNOC, the state-owned oil company of Abu Dhabi, announced that it has reached an agreement to purchase German chemicals firm Covestro for 14.7 billion euros ($16.4 billion).
• Covestro announced that ADNOC will launch a 62 euros-per-share voluntary public takeover, implying an equity value of approximately 11.7 billion euros and representing a premium of around 54% to Covestro's closing price on June 19, according to a statement from the company.
• As it aims to diversify its portfolio, ADNOC has been exploring opportunities to expand its presence in the chemicals industry.

On Tuesday, ADNOC, the state-owned oil company of Abu Dhabi, announced that it has reached an agreement to purchase German chemicals firm Covestro for 14.7 billion euros ($16.4 billion).

The Abu Dhabi National Oil Company (ADNOC) will launch a 62 euros-per-share voluntary public takeover of Covestro, implying an equity value of approximately 11.7 billion euros and representing a premium of around 54% to Covestro's closing price on June 19, according to a statement from Covestro.

Covestro shares were trading 3.7% higher as of 10:09 a.m. London time.

ADNOC announced that the deal is worth 14.7 billion euros and is crucial for the company's international growth strategy of becoming a top-five chemicals player.

Sultan Ahmed al-Jaber, group CEO and managing director of ADNOC, stated that Covestro, as a global leader and industrial pioneer in chemicals, possesses unmatched expertise in high-tech specialty chemicals and materials, utilizing advanced technologies such as AI.

Polymer materials for construction and engineering processes are manufactured by Covestro, a former unit of. These products are utilized in various sectors, including sports, telecommunications, and the chemical industry.

In exchange for the investment agreement, ADNOC committed to purchasing 1.17 billion euros in new shares of Covestro through a capital increase.

'Unprecedented' deal

According to Covestro CEO Markus Steilemann, the deal was the result of "intensive" and "very constructive" discussions between the two parties, as he stated on CNBC's "Street Signs Europe" on Tuesday.

Steilemann stated that the upcoming deal between a strategic investor from the Middle East and a German DAX-listed company is likely to be the largest one, potentially. This is unprecedented, meaning that quality is given priority over time.

Steilemann, the German Chemical Industry Association president, acknowledged that the global and German chemicals sector faces challenges and that these challenges won't disappear with the new owner of the company.

The CEO stated to CNBC that they believe having a stronger partner will help speed up the implementation of their sustainable future strategy, regardless of economic conditions. Although they are tired from reaching this milestone, they are also thrilled about it.

In June, the German materials giant made its financial records available to ADNOC due to takeover rumors. ADNOC aims to expand its presence in the chemicals industry as it seeks to diversify its investments.

In 2023, ADNOC acquired a majority stake in ammonia producer Fertiglobe by purchasing OCI's stake for $3.62 billion, following its earlier acquisition of a 24.9% stake in Austrian chemicals firm OMV.

According to a Tuesday note from Jefferies' analysts, they anticipate minimal antitrust and regulatory risks associated with the deal due to the "minimal overlap in operations."

Covestro's management and supervisory board plan to recommend the transaction to shareholders, pending an offer review.