Why is ADNOC Betting Big on Germany’s Covestro?

ADNOC International, a subsidiary of Abu Dhabi National Oil Company (ADNOC), has just agreed to buy Covestro, a German chemicals company, for US$16.34 billion. This is a big move as ADNOC is expanding its presence in the chemicals industry.

Basically, ADNOC is offering US$68 per share to Covestro shareholders, which is 54 percent higher than the stock price before any rumours about a deal started circulating back in June. Right now, Covestro’s stock is at US$64, so the offer is actually a 7 percent premium above the current price.

On top of that, ADNOC has also agreed to buy 10 percent of newly issued Covestro shares at the same price, which will inject US$1.29 billion into the company. This acquisition marks the largest cross-border deal for the UAE and is also the biggest foreign investment into Germany in five years.

ADNOC says this move is a key part of its strategy to become one of the top five players in the global chemicals industry. Covestro, based in Leverkusen, is known for its advanced materials and tech, including AI-driven processes. Though Covestro has been dealing with some challenges, reporting lower earnings and reducing its forecast for next year, the company sees this deal as a win-win.

Covestro’s CEO, Markus Steilemann, mentioned that ADNOC is a financially strong partner and that their shared commitment to technology, innovation, and sustainability makes this partnership a good fit.

Even Reliance Industries, which has partnered with ADNOC before, weighed in, saying this deal will only strengthen ADNOC’s capabilities in the energy and chemicals sectors. Germany, on its part, seems to welcome the deal as well, with various leaders commenting on how this shows confidence in the country’s business environment.

So, in short, this acquisition is a huge step for ADNOC as it pushes further into the chemicals sector, and Covestro views it as a key partnership for its future growth.