Covestro shareholders accept ADNOC's XRG $15 bln takeover offer

Date:12-20-2024

XRG, the international investments arm of Abu Dhabi National Oil Company (ADNOC) will become the majority owner of Covestro, it said on Thursday, after shareholders in the German chemicals maker approved a takeover offer.

The deal is the largest recorded foreign acquisition by a Gulf company, as the hydrocarbon-rich region seeks to accelerate investments to reduce dependence on oil in response to the global transition to cleaner energy.

It is also the second biggest takeover by a Middle Eastern firm. The biggest was Israeli company Teva Pharmaceuticals' purchase of Allergan's generic drugs business in 2015, according to Dealogic data.

Shares tendered and bought by XRG are equivalent to 91.32% of Covestro's total outstanding shares, XRG said. The takeover needs to meet regulatory conditions and is expected to close in the second half of next year.

ADNOC struck a deal in October to buy Covestro for 14.7 billion euros ($15.28 billion), including debt after talks started more than a year before.

ADNOC aims to develop its petrochemicals operations to drive future growth, along with gas, liquefied natural gas and renewable energy.

"Today's significant milestone marks the first major transformational investment for XRG in chemicals, accelerating our ambition to become a top five global chemicals player," XRG Executive Chairman Sultan Al Jaber, also ADNOC's group chief executive, said in a statement.

"This is a long-term investment and will be a standalone platform to grow our polycarbonate and polyurethane business," Khaled Salmeen, ADNOC’s Executive Director of Downstream Industry, Marketing and Trading, told Reuters.

The state oil company has concluded several deals in gas and chemicals this year. Last month, it said it was creating XRG to focus on overseas investments in lower carbon energy, including gas and chemicals, saying it was valued at more than $80 billion.

The group has also been in talks with Austria's OMV, about a potential merger of Borealis AG and Borouge.

"The discussions are very positive and moving in the right direction," Salmeen said.

XRG's board, announced last week, includes Blackstone's Jon Gray and former BP boss Bernard Looney.

XRG closed a deal with BP this week for a new natural gas venture in Egypt, with the British oil major holding 51% and XRG 49%.