ADNOC's Strategic Acquisition of Covestro: A Game-Changer in the Global Chemical Industry

Introduction

The global chemical industry witnessed a monumental shift with the acquisition of Covestro, the German polymer manufacturer, by the Abu Dhabi National Oil Company (ADNOC). This move not only signifies ADNOC's entry into the chemical industry's top league but also sets the stage for a new era of chemical technology and international growth.

1. The Acquisition Overview:

ADNOC has successfully acquired the majority stake in Covestro, surpassing the minimum acceptance threshold of 50% plus one share in the voluntary public tender offer. This acquisition positions ADNOC's newly established investment firm, XRG, to become one of the top five chemical companies globally.

2. Regulatory Approvals and Future Steps:

The completion of the acquisition is subject to further regulatory conditions, including merger control, foreign investment control, and EU foreign subsidy regulation approval. XRG is focused on meeting these remaining conditions, with the transaction expected to be completed in the second half of 2025.

3. Impact on Covestro:

Post-acquisition, Covestro is set to delist and/or be squeezed out if XRG decides to execute either, with the board agreeing to support these moves. ADNOC has committed to not entering into control and/or profit and loss transfer agreements within the investment agreement term ending on December 31, 2028.

4. Strategic Significance:

This acquisition is the first major takeover of a DAX company by Gulf investors and the largest deal in the European chemical industry in years, valued at €11.6 billion. It is seen as the first step towards ADNOC's ambition to join the top alliance of the global chemical industry.

5. Antitrust and Security Concerns:

While the transaction is expected to face scrutiny from various countries based on their foreign direct investment rules, Covestro's technologies and polymer products are not considered security-related infrastructure, making antitrust issues less likely.

6. Green Transition and Future Investments:

Covestro, a leader in future chemical technologies not based on fossil raw materials, aligns with ADNOC's interest in preparing for a post-oil and gas era. The focus is on renewable raw materials and a circular economy, including deriving new raw materials from plastic waste.

Conclusion

ADNOC's acquisition of Covestro is a strategic masterstroke that will reshape the global chemical industry. It highlights the Middle East's growing influence in the chemical sector and signals a significant shift towards sustainable chemical production and technology.