Covestro AG  signed an investment agreement with entities of the ADNOC Group, including ADNOC International Ltd. and its subsidiary, ADNOC International Germany Holding AG ("the bidder"). The agreement stipulates that the bidder will make a public takeover offer for all outstanding shares of Covestro at a price of €62.00 per share. ADNOC International is also committing to fully support the company’s "Sustainable Future" strategy. At the same time, the Board of Management and the Supervisory Board of Covestro decided that, upon completion of the transaction, the company’s share capital will increase by 10% (18,900,000 shares), and at closing, the new shares will be issued to the bidder at the offer price of €62.00 per share. This totals €1.17 billion, with a simplified exclusion of subscription rights.

Dr. Markus Steilemann, CEO of Covestro, said, "We are convinced the agreement reached today with ADNOC International is in the best interest of Covestro, our employees, our shareholders, and all other stakeholders. With ADNOC International’s support, we will have an even stronger foundation for sustainable growth in highly attractive sectors and can make a greater contribution to the green transformation. We regard ADNOC International as a financially strong and long-term partner with whom we will further drive our successful 'Sustainable Future' strategy in all market conditions. Our complementary growth strategies and shared commitment to advanced technologies, innovation, and sustainability are key cornerstones of our partnership."

His Excellency Dr. Sultan Ahmed Al Jaber, ADNOC managing director and group CEO, said, "As a global leader and industrial pioneer in chemicals, Covestro brings unmatched expertise in high-tech specialty chemicals and materials, using advanced technologies including AI. This strategic partnership aligns seamlessly with ADNOC’s ongoing smart growth and future-proofing strategy and our vision to become a top 5 global chemicals company. It represents a pivotal step for both organizations and embodies our disciplined approach to investing in strategic assets that drive long-term value and unlock new growth opportunities, while reinforcing our commitment to diversifying ADNOC’s portfolio. Our aligned strategies uniquely position us to meet the growing global demand for energy and chemical products while accelerating the transition to a circular economy."

Key Transaction Details

The bidder intends to make a cash offer to Covestro shareholders of €62.00 per share. This price implies an equity value for Covestro of approximately €11.7 billion and represents a premium of about 54% to the unaffected closing price on June 19, 2023, the day before any media coverage of a potential transaction, and a premium of 21% to the closing price on June 23, 2024, the last share price before Covestro announced the beginning of confirmatory due diligence and the start of concrete negotiations.

The offer will be subject to a minimum acceptance level of 50% plus one share and customary closing conditions, including merger control, foreign investment control, and EU foreign subsidies clearances.

In compliance with the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, WpÜG), the offer document, expected to be available within six weeks, and other information related to the bidder’s public takeover offer will be made available at www.covestro-offer.com after approval by BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht).

After thorough consideration, the Supervisory Board and Board of Management of Covestro welcome and support the bidder’s announced takeover offer. Both boards will carefully review the offer document after its publication and will issue their statements in accordance with Section 27 WpÜG shortly thereafter. Subject to the review of the offer document, the Board of Management and the Supervisory Board expect to recommend acceptance of the offer to shareholders.

Partnership Expands Covestro's Position in Growth Markets

Covestro has a clear growth strategy and is making significant progress in its strategic transformation, which will further expand its position in attractive growth markets. ADNOC International views Covestro as the foundation of its performance materials and specialty chemicals business and believes in Covestro's vision to become fully circular.

In the investment agreement, which runs until the end of 2028, Covestro and certain ADNOC Group entities, including ADNOC International, have agreed on the partnership’s main terms. Specifically, ADNOC International commits to maintaining Covestro’s existing business activities, corporate governance, and organizational structure.

ADNOC International has assured Covestro of its full support for its "Sustainable Future" strategy and intends to subscribe to new Covestro shares at the offer price, increasing the company’s share capital by 10%. This will result in proceeds of €1.17 billion, which Covestro will use to implement its growth strategy.

ADNOC International has also committed to following German governance regulations and retaining the co-determined Supervisory Board. Two members of the Supervisory Board representing shareholders will remain independent of the ADNOC Group after the takeover offer.

The investment agreement explicitly recognizes existing general works agreements, collective bargaining agreements, and the rights of works councils in Germany. There are no plans to sell, close, or significantly reduce Covestro's business activities, and ADNOC International agrees not to initiate any of these actions. The agreement also includes a commitment to protect Covestro's technology and intellectual property.

ADNOC International further commits that Covestro will continue to operate as a stock corporation and that no domination or profit-and-loss transfer agreement will be concluded with Covestro.

The investment agreement and ADNOC International's commitments demonstrate their trust in Covestro's management team, which will remain responsible for the company’s operational management and strategic direction.

Covestro’s Board of Management has agreed, subject to fiduciary duties, to support a delisting offer or squeeze-out if ADNOC International chooses to proceed. However, the agreement ensures that even after a delisting or squeeze-out, Covestro will continue as a stock corporation under German law with the same governance and a co-determined Supervisory Board, with two members independent of ADNOC International, and its headquarters in Leverkusen.

In connection with the investment agreement, the Board of Management, supported by the Supervisory Board, has decided not to propose a dividend payment until the transaction is complete or until the regulatory approval period or the termination of the agreement.

Goldman Sachs and Perella Weinberg are financial advisors to Covestro’s Board of Management, with Linklaters as legal advisor. For Covestro’s Supervisory Board, Rothschild & Co and Macquarie Capital are financial advisors, and SZA Schilling, Zutt & Anschütz are legal advisors.