ADNOC's $16.4bn Acquisition of Covestro
- katerinageorgiou5
- 4 days ago
- 5 min read
By Moritz Ibe, Ben Preece, Avital Anoff, Annant Bhargava (University of St Andrews); Haci Eren Sidar, Leon Gaster, Adalia Melvin, Aviral Jain (University of Nottingham)
Photo: Yuan Chen (Unsplash)
Overview of the deal
Acquirer: ADNOC
Target: Covestro
Implied Equity Value: €11.7 billion
Total Transaction Size: €14.7 billion (including debt)
Closed Date: Second half of 2025 (expected)
Target Advisors: Goldman Sachs, Perella Weinberg (financial) and Linklaters (legal) advised Covestor's Board of Management; Rothschild & Co., Macquarie Capital (financial) and SZA Schilling, Zutt & Anschutz (legal) advised the Supervisory Board.
Acquirer Advisors: Morgan Stanley (financial) and Freshfield Bruckhaus Deringer (legal)
Through the acquisition of Covestro, ADNOC will expand its business beyond conventional upstream activities and strengthen its position in the global petrochemical and downstream sectors. This strategic partnership aligns with ADNOC's ongoing smart growth and future proofing strategy, supporting its vision to become a top five global chemicals company.
The deal positions ADNOC to benefit from rising demand for sustainable and low-emission materials, especially in Europe and Asia-Pacific, through Covestro's portfolio of high-performance polymers and circular economy technology. ADNOC gains access to Covestro's cutting-edge R&D expertise and innovation pipeline, enhancing its ability to provide specialised, value-added products in industries such as electronics, construction, and automobiles.
Additionally, the acquisition supports ADNOC's broader energy transformation objectives. Covestro's ESG credentials, particularly in recycling technologies and climate-neutral production, will help ADNOC improve its environmental reputation and attract ESG-conscious customers.
The partnership creates opportunities for long-term operational synergies through improved production efficiency, unified procurement procedures, and streamlined supply chains.
“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" - His Excellency Dr. Sultan Ahmed Al Jaber, ADNOC Managing Director and Group CEO
Company Details (Acquirer - ADNOC)
Abu Dhabi National Oil Company (ADNOC) is a leading integrated oil and gas company founded in 1971 and headquartered in Abu Dhabi, UAE. It is engaged in a broad spectrum of activities, including exploration, production, refining, processing, and distribution of oil and gas, as well as chemical and petrochemical manufacturing. Multiple subsidiaries of ADNOC are publicly listed, including ADNOC Drilling and ADNOC Logistics & Services. ADNOC maintains strategic partnerships with global energy leaders like TotalEnergies, Baker Hughes, and Eni, and has framework agreements with China National Offshore Oil Corporation and PT Pertamina, reinforcing its influence in the global energy market.
Founded in 1971, headquartered in Abu Dhabi, United Arab Emirates
CEO:Â Sultan Ahmed AI-Jaber (2016)
Number of employees: 55,000
Market Cap:Â AED 40.38 billion
Enterprise Value (EV): Â AED 44.94 billion
LTM Revenue: AED 34.63 billion (2023)
LTM EBITDA: Â AED 3.68 billion (2023)
LTM EV/Revenue: approximately 1.29x
LTM EV/EBITDA: approximately 12.21x
Recent Transactions: Purchase of controlling Stake in Fertiglobe (2024), 10% Equity Stake in Major LNG Development in Mozambique (2024), 30% Equity Stake in Absheron Gas Field (2023)
Company Details (Target - Covestro)
​Covestro AG, headquartered in Leverkusen, Germany, is a leading global supplier of high-performance polymer materials. In 2024, the company reported sales of €14.2 billion, a slight decrease from the previous year, primarily due to lower selling prices. Covestro operates 46 production sites worldwide, manufacturing polyurethanes and polycarbonates essential to industries such as automotive, construction, and electronics. Since its spin-off from Bayer in 2015, Covestro has prioritised sustainability, aiming for climate neutrality and promoting the circular economy through innovative recycling technologies and the use of alternative raw materials.
Founded in 2015, headquartered in Leverkusen, Germany
CEO: Markus Steilemann (since 2018)
Number of employees: ~17,500 (as of 2023)
Market cap: €11.1 billion (as of April 7, 2025)
Enterprise Value (EV): €14.8 billion
LTM Revenue: €14.4 billion
LTM EBITDA: €1.1 billion
LTM EV/Revenue: 1.02
LTM EV/EBITDA: 13.41
Projections and Assumptions
Short-Term Consequences
In the short term, Covestro’s acquisition by ADNOC is expected to be dilutive to EPS as integration proceeds. Following a €72 million net loss in H1, Covestro’s financial performance may face continued strain before seeing accretive EPS, which analysts anticipate may take two to three quarters. ADNOC’s capital infusion and operational support are aimed at stabilising Covestro’s liquidity and market position, while a €1.17 billion capital increase will strengthen Covestro’s funding and buffer against short-term volatility.
Expanding Covestro’s presence in European markets presents regulatory challenges for ADNOC, including stringent environmental compliance requirements that could slow integration and increase costs. In response, ADNOC plans to maintain Covestro’s leadership structure and commit to European standards, helping smooth the transition while ADNOC gains significant exposure to a market with high growth potential for Covestro’s high-tech materials in sectors like construction and automotive.
Operationally, ADNOC intends to incorporate Covestro’s AI-driven manufacturing processes to enhance efficiency, part of ADNOC’s broader energy strategy. Although these efficiencies may bring medium-term cost savings, immediate impacts could be limited as scaling these technologies across ADNOC’s global footprint will take time.
Investor response has been cautiously optimistic, with Covestro’s shares initially rising 3.7% after the announcement. However, market volatility could affect share stability as the integration unfolds and investors await tangible improvements. The leadership from both companies has emphasised that the transaction will prioritise sustainable growth, laying a clear path forward for Covestro’s long-term strategy.Â
Long-Term Upsides
Through the acquisition, ADNOC will be able to expand its business beyond its conventional upstream activities and bolster its position in the global petrochemical and downstream sectors. ADNOC will be positioned to benefit from the rising demand for sustainable and low-emission materials, especially in Europe and Asia-Pacific, thanks to Covestro's portfolio of high-performance polymers and circular economy technology.
The chance for ADNOC to use Covestro's cutting-edge R&D expertise and innovation pipeline in its own chemical operations is an additional benefit. Adnoc will be better equipped to provide specialised, value-added products in industries such as electronics, construction, and automobiles as a result.
It is also anticipated that the agreement will help ADNOC achieve its larger energy transformation objectives. ADNOC will be able to raise its environmental reputation and draw in more ESG-conscious customers thanks to Covestro's ESG credentials, especially in recycling technologies and climate-neutral production.
Long-term operational synergies can also be achieved, particularly through improved production efficiency, unified procurement procedures, and streamlined supply chains.
Risks and Uncertainties
Abu Dhabi National Oil Company’s (ADNOC) proposed $16.4 billion acquisition of Covestro, a German chemical and polymer company, presents both strategic opportunity and considerable risk. One of the main uncertainties is the regulatory approval process. Although India’s Competition Commission has already cleared the deal, approvals are still pending in key regions such as the European Union, the United States, and China. The European Commission is expected to make a decision by May 12, 2025, but it could extend its review or introduce conditions that delay or reshape the agreement.
There are also market risks to consider. Covestro operates in a highly cyclical chemicals sector, which is currently facing weak demand, margin pressures, and global oversupply. Integrating Covestro’s operations into ADNOC’s existing petrochemical business may be challenging, especially given differences in regional regulations, workforce dynamics, and corporate cultures. These factors could affect the pace and success of integration.
Environmental concerns add another layer of complexity. Covestro is a major producer of plastics and polyurethanes, which are closely linked to fossil fuels. As global pressure mounts for more sustainable solutions, ADNOC may need to make significant investments in green technologies to support Covestro’s innovation in areas like CO₂-based materials.
Overall, while the deal fits ADNOC’s long-term strategy to diversify beyond oil, it must overcome a range of regulatory, operational, and environmental hurdles to deliver lasting value.