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Abu Dhabi state oil giant ADNOC said on Tuesday that it has agreed to buy German chemicals producer Covestro for $18bn (EUR15.9bn), including debt, sending Covestro shares up 4 per cent in early trade.
The deal represents one of the biggest foreign takeovers by a Gulf state as Abu Dhabi and other countries in the region seek to reduce their economies’ heavy dependence on oil in the face of the global energy transition.
It follows protracted negotiations between the two companies and will see ADNOC pay EUR62 per Covestro share, which is equal to EUR14.7bn, including about EUR3bn in debt.
ADNOC added that it would also buy EUR1.17bn worth of new shares in Covestro, a former Bayer unit, from a capital increase to improve funding of the takeover target.
The deal marks a cornerstone for ADNOC’s plans to grow its petrochemicals business along with gas and renewable energy.
ADNOC has also been in talks with Austria’s OMV for more than a year to merge their petrochemical joint ventures Borealis and Borouge. ADNOC took a 24.9 per cent stake in OMV from Abu Dhabi sovereign fund Mubadala in February.
Covestro, which makes plastics and chemicals for the automotive, construction and engineering sectors, was created in 2015 after being spun off from Bayer. It opened its books to ADNOC in June – a year after the Abu Dhabi energy giant’s initial interest was reported.
Covestro reported a net loss of EUR72m in the first six months of the year, compared with a profit of EUR46m in the previous year.
The agreement illustrates an increase in dealmaking between the Middle East and Europe, advisers and analysts have told Reuters. GCC investors are drawn to company valuations that lag those in the US, an easier regulatory backdrop for buyers from the region, and where investment needs make them more welcome.
It is the Middle East’s second-biggest acquisition after Israel’s Teva Pharmaceuticals move to buy Allergan’s generic drugs business for around $40bn in 2015, according to Dealogic data.
