Covestro AG (“Covestro”) signed an Investment Agreement with certain entities of the ADNOC Group, including ADNOC International Limited (“ADNOC International”) and its subsidiary, ADNOC International Germany Holding AG (“Bidder”).
Supports Covestro’s “Sustainable Future” Strategy
The agreement outlines that the Bidder will make a public takeover offer for all outstanding Covestro shares at €62.00 per share. ADNOC International has also committed to fully supporting Covestro’s “Sustainable Future” strategy.
Additionally, Covestro’s Board of Management and Supervisory Board decided to increase the Company’s share capital by 10% (18.9 million shares) upon completion of the transaction. The new shares will be issued to the Bidder at the offer price of €62.00 per share, totaling €1.17 billion. This will occur under the simplified exclusion of subscription rights.
Dr. Markus Steilemann, CEO of Covestro, said, “We are convinced that 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 an even greater contribution to the green transformation. We regard ADNOC International as a financially strong and long-term oriented partner with whom we will further drive our successful “Sustainable Future” strategy in all market conditions. Our complementary growth strategies, 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 is a natural fit and 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. It represents a 54% premium to the closing price on June 19, 2023, before any media coverage of the deal, and a 21% premium to the closing price on June 23, 2024, just before Covestro announced its due diligence and negotiations.
The offer requires a minimum acceptance of 50% plus one share and will be subject to customary closing conditions, including merger and foreign investment controls and EU foreign subsidies clearances.
As required by the German Securities Acquisition and Takeover Act (WpÜG), the offer document will be available within six weeks, once approved by BaFin. The Bidder’s public takeover details will also be shared on an official website.
After thorough consideration, the Supervisory Board and the 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 reasoned statements pursuant to Section 27 WpÜG shortly after. Subject to the review of the offer document, the Board of Management and the Supervisory Board assume that they will recommend the acceptance of the offer to the Company’s shareholders.
Enables Expansion of Covestro’s Position in Attractive Growth Markets
Covestro has a clear growth strategy and is already making significant progress in its strategic transformation that will further expand its excellent position in attractive growth markets. ADNOC International sees Covestro as the foundational platform of its Performance Materials and Specialty Chemicals business and is convinced of Covestro’s strategic perspective and its vision to become fully circular.
In the joint Investment Agreement, which runs until the end of 2028, Covestro and certain entities of the ADNOC Group, including ADNOC International, have agreed on the main cornerstones of the partnership. In particular, the agreement contains several obligations on the part of ADNOC International to maintain Covestro’s existing business activities, corporate governance and organizational business structure.
ADNOC International has assured Covestro of its full support for Covestro’s “Sustainable Future” strategy and intends to fully support Covestro in further executing on this strategy. To this end, the Bidder shall subscribe to new Covestro shares at the offer price via an increase of the Company’s share capital by 10% under simplified exclusion of subscription upon the completion of the transaction, this will result in an amount of €1.17 billion proceeds at an offer price of €62.00 which Covestro will use to foster the further implementation of its growth strategy.
Ensures Covestro’s Independent Governance Post-takeover
In the agreement, ADNOC International commits, among other items, to recognizing the German governance regulations and to retaining the co-determined Supervisory Board. An important component is also the commitment that two members of the Supervisory Board on the shareholder representatives’ side will remain independent of ADNOC Group after the takeover offer has been completed.
The Investment Agreement also contains ADNOC International’s explicit recognition of the existing general works agreements, collective bargaining agreements and the rights of the works councils in Germany. In addition, there are no plans to sell, close or significantly reduce Covestro’s business activities as part of the transaction and ADNOC International undertakes in the Investment Agreement not to initiate any of the above. The Investment Agreement also contains a commitment to protect Covestro’s technology and intellectual property.
Furthermore, ADNOC International undertakes in the Investment Agreement that Covestro will continue to be managed as a stock corporation and that no domination and/or profit and loss transfer agreement will be concluded with Covestro.
The Investment Agreement and ADNOC International’s commitments therein express ADNOC International’s utmost trust and confidence in Covestro’s management team. Covestro’s Board of Management in its current composition will, therefore, continue to be responsible for the operational management and strategic direction of the Company.
Covestro’s Board of Management has agreed, subject to its fiduciary duties, to support a delisting offer and/or squeeze-out if ADNOC International intends to execute either. However, the Investment Agreement stipulates that even after a potential delisting and/or a squeeze-out, Covestro will continue to be managed as a stock corporation under German law with the same governance as before, a co-determined Supervisory Board with two Supervisory Board members who are independent of ADNOC International and its registered headquarters in Leverkusen.
In connection with the conclusion of the Investment Agreement, the Board of Management, with the support of the Supervisory Board, has also decided to not propose a dividend payment until the transaction has been completed or until the expiration of the period for regulatory approvals or a termination of the Investment Agreement.
Goldman Sachs and Perella Weinberg are acting as financial advisors to Covestro’s Board of Management on the transaction, with Linklaters acting as legal advisor. For Covestro’s Supervisory Board, Rothschild & Co and Macquarie Capital are acting as financial advisors, and SZA Schilling, Zutt & Anschütz as legal advisors.
Source: Covestrohttps://omnexus.specialchem.com/