ADNOC nears €14B acquisition of Covestro


Abu Dhabi National Oil Company (ADNOC) is nearing a potential acquisition of German chemical firm Covestro. The deal, which has been the subject of ongoing negotiations, now sees ADNOC offering approximately €14 billion for Covestro, a marked increase from their earlier offer of €55 per share made in June.

Covestro, one of Germany’s major companies specializing in insulation foam, has been a subject of interest for ADNOC as it seeks to expand its presence in the chemicals industry, aligning with a broader diversification strategy.

ADNOC’s push for diversification

ADNOC, under the leadership of Sultan al-Jaber, is actively pursuing diversification initiatives, deploying significant funds from its hydrocarbon revenues into sectors that could reduce its dependence on oil. The group is at the forefront of the United Arab Emirates’ efforts to transition towards a more sustainable and diversified economy.

The acquisition of Covestro is part of ADNOC’s ambition to expand its chemicals business. It signifies ADNOC’s commitment to investing in areas that can drive future growth while also aligning with its broader sustainability goals. These goals are particularly pertinent as the UAE hosts the COP28 climate summit, emphasizing its commitment to addressing climate change.

Challenges and opportunities

For Covestro, this potential acquisition could provide an opportunity to navigate challenges posed by the changing energy landscape. The drop in energy prices has presented challenges for chemical companies, and Covestro has been no exception. The company reported a more than 20% decline in second-quarter sales compared to the previous year, with earnings also slipping significantly.

However, ADNOC’s interest in Covestro also brings up questions regarding the alignment of their sustainability strategies. Covestro has been committed to sustainability in its operations, and any deal would likely entail discussions about ensuring the continuation of these efforts.

A complex negotiation

While the offer represents a substantial premium from Covestro’s undisturbed share price, the possible conditions of the deal are still subject to negotiations. These negotiations may include discussions about how ADNOC can support Covestro’s sustainability strategy and invest in the company’s future growth.

ADNOC’s efforts to diversify its business and expand internationally have seen the formation of a nearly 50-strong team of dealmakers. They are actively pursuing approximately $50 billion in transactions, including simultaneous deals with Brazilian petrochemical maker Braskem and Austria’s OMV.