Abu Dhabi National Oil Company (ADNOC) has reached an agreement to buy German chemicals manufacturer Covestro, in what would be the largest acquisition in the history of the United Arab Emirates and the largest purchase of a European company in the Middle East.
The deal, worth more than $16 billion, comes at a difficult time for Germany. Amid the worst economic crisis in a decade, the sale of Covestro represents the loss of another gem of the industrial base of Europe’s largest economy after a wave of foreign acquisitions. Negotiations about further acquisitions are ongoing.
By buying Covestro, ADNOC, whose daily oil production of 4.85 million barrels per day far exceeds that of rivals such as Shell, ExxonMobil and Chevron, aims to accelerate its diversification into higher-value oil-based products such as plastics and plans to help the German company to become one of the five largest global producers of chemical products. Covestro, founded in 2015 as a subsidiary of Bayer, is a leader in the production of polyurethane foam, which is needed in the production of everything from household appliances to mattresses and shoes, as well as polycarbonate, a lightweight but durable plastic often used as a replacement for metal. . in the automotive and electronics industries.
ADNOC’s offer to acquire Covestro was timely. The EU’s chemical industry suffered the third-largest fall in production last year, down 10.6%, according to the European Chemical Industry Council. The decline comes amid costly efforts to make the sector climate neutral and produce safe and sustainable chemicals, and production has been hit by slow economic growth in China and factors such as pressure on the auto industry. However, demand is expected to recover and grow in the medium to long term. Meanwhile, ADNOC is working to increase its oil and gas production capacity and acquire clean energy assets around the world as the energy transition undermines demand for fossil fuels. Gulf companies seeking to enter Western markets have faced a range of challenges, from regulatory hurdles to opposition from local governments. ADNOC’s deal with Covestro, according to experts, offers a counter-narrative and strengthens Abu Dhabi’s authority in handling complex cross-border transactions, while encouraging more future deals between the Gulf states and Europe.