Covestro AG (“Covestro” or “Company”) 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”). The agreement stipulates, among other items, that the Bidder will make a public takeover offer for all outstanding shares of Covestro at a price of €62.00 per share. In addition, ADNOC International is committing itself to fully supporting 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 shall be increased by 10% (18.900.000 shares) and that, at and subject to closing, the new shares shall be issued to the Bidder against payment of a price per share equal to the offer price, thus, based on an offer price of €62.00 against a total amount of €1.17 billion, under simplified exclusion of subscription rights.
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 approximately 54 percent to the unaffected closing price on June 19, 2023, the day prior to any media coverage of a potential transaction, and a premium of 21 percent to the closing price on June 23, 2024, the last share price prior to Covestro announcing the beginning of the confirmatory due diligence and the start of concrete negotiations.
The offer will be subject to a minimum acceptance level of 50 percent plus one share and customary closing conditions, including merger control, foreign investment control, EU foreign subsidies clearances.
Partnership enables expansion of Covestro's position in attractive growth markets
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.
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.
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.
