ADNOC to buy German chemicals firm Covestro for $16 bn

Abu Dhabi National Oil Company (ADNOC) has agreed to acquire German chemicals company Covestro in a deal valued at 14.7 billion euros ($16.3 billion), in what is seen as the largest overseas acquisition by the Abu Dhabi energy major.

ADNOC will assume euro 3 billion in Covestro’s debt and buy an additional 1.2 billion euros worth of new shares in Covestro on closure of the transaction, as per the terms of the deal.

Covestro said the Abu Dhabi oil giant will ensure that it continues to hold the stake in Covestro and protect its business as also its technology and intellectual property.

The 62 euros-per-share cash deal deal, which comes after protracted negotiations and at a sensitive time for foreign takeovers in Germany and Europe as a whole, is key to ADNOC growing beyond mere oil play and branching out to petrochemicals as well.

The deal, one of the largest foreign takeovers by a Gulf state, is also part of the region’s attempt to reduce its dependence on oil at a time when the world embraces cleaner energy.

Covestro makes plastics and chemicals for the automotive, construction and engineering sectors, was spun off from German chemicals giant Bayer in 2015.

The deal is subject to a minimum acceptance threshold of 50 per cent plus one share of Covestro's capital.

ADNOC, which bought a 24.9 per cent stake in Austria’s OMV from Abu Dhabi sovereign fund Mubadala in February, has also been in negotiations with OMV to merge its petrochemical joint ventures Borealis and Borouge.