Abu Dhabi's state-owned oil company, Adnoc, announced Tuesday that it will acquire German chemicals producer Covestro AG in a €14.7 billion ($16.3 billion) deal. The move comes as the Gulf state seeks to reduce its reliance on oil while advancing its green energy goals.

Adnoc to acquire Covestro : Voluntary Public Takeover Offer

Adnoc said it has entered into an investment agreement with Covestro, offering shareholders €62 per share. This brings the total deal value to €14.7 billion, which includes €3 billion in debt. The offer aims to launch a voluntary public takeover of Covestro, furthering Adnoc's ambition to become a global leader in the chemicals sector.

To facilitate the transaction, Adnoc has enlisted Freshfields Bruckhaus Deringer LLP as its legal adviser, while Covestro's board of management is being advised by Linklaters LLP. German law firm SZA Schilling Zutt & Anschütz is representing Covestro's supervisory board.

Strategic Move for Global Growth

The deal represents a significant strategic shift for Adnoc as it pivots away from traditional oil investments to build a robust presence in the chemical industry. Covestro, originally spun off from German pharmaceutical giant Bayer in 2015, will serve as the cornerstone of Adnoc’s materials and specialty chemicals division. Adnoc plans to invest further by purchasing 18.9 million new shares of Covestro for €1.17 billion, which will be funded through its existing cash reserves.

"Acquiring Covestro is a pivotal step that reinforces our commitment to diversifying Adnoc's portfolio," said Sultan Ahmed Al Jaber, Adnoc's managing director and group CEO. He emphasized that the deal will unlock new growth opportunities and position Adnoc as a top global player in the chemicals market.

Adnoc to acquire Covestro : Green Energy Focus

The Gulf region, particularly Abu Dhabi, has been seeking ways to diversify its investments beyond oil, especially amid the global transition to green energy. Covestro's management, led by CEO Markus Steilemann, welcomed the acquisition, noting that Adnoc's backing will strengthen the company’s capacity for sustainable growth.

“With Adnoc International’s support, we will have an even stronger foundation for sustainable growth in highly attractive sectors and can make an even greater contribution to the green transformation,” Steilemann said.

Deal Terms and Conditions

The completion of the €14.7 billion deal is contingent on several factors, including Covestro shareholders accepting the tender offer. The transaction will require approval from shareholders holding more than 50% of Covestro's shares. Additionally, the deal is subject to regulatory clearance, including merger control and foreign investment approvals within the European Union.

Adnoc has requested that Covestro's current management team continue to lead the company post-acquisition. Covestro's board has expressed its support for the deal and will recommend shareholders accept the offer.

Adnoc to acquire Covestro : Advisers on the Deal

A group of top financial and legal advisers is overseeing the transaction. Morgan Stanley is serving as Adnoc's financial adviser, while Covestro's board of management is receiving guidance from Goldman Sachs and Perella Weinberg Partners. Rothschild & Co. and Macquarie Capital are advising Covestro's supervisory board.

Although no specific timeline has been provided, both companies are optimistic about the deal's completion, pending regulatory and shareholder approvals.