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Deal is biggest foreign purchase by a Gulf company

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Ambitious to rank among top five in global chemicals

sector

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Seeking to diversify as world moves away from fossil fuels

(Recasts, adds quotes in paragraphs 7-8 and 11)

By Yousef Saba

DUBAI, Dec 19 (Reuters) - XRG, the international

investments arm of Abu Dhabi National Oil Company (ADNOC) will

become the majority owner of Covestro, it said on

Thursday, after shareholders in the German chemicals maker

approved a takeover offer.

The deal is the largest recorded foreign acquisition by a

Gulf company, as the hydrocarbon-rich region seeks to accelerate

investments to reduce dependence on oil in response to the

global transition to cleaner energy.

It is also the second biggest takeover by a Middle Eastern

firm. The biggest was Israeli company Teva Pharmaceuticals'

purchase of Allergan's generic drugs business in 2015, according

to Dealogic data.

Shares tendered and bought by XRG are equivalent to 91.32%

of Covestro's total outstanding shares, XRG said. The takeover

needs to meet regulatory conditions and is expected to close in

the second half of next year.

ADNOC struck a deal in October to buy Covestro for 14.7

billion euros ($15.28 billion), including debt after talks

started more than a year before.

ADNOC aims to develop its petrochemicals operations to drive

future growth, along with gas, liquefied natural gas and

renewable energy.

"Today's significant milestone marks the first major

transformational investment for XRG in chemicals, accelerating

our ambition to become a top five global chemicals player," XRG

Executive Chairman Sultan Al Jaber, also ADNOC's group chief

executive, said in a statement.

"This is a long-term investment and will be a standalone

platform to grow our polycarbonate and polyurethane business,"

Khaled Salmeen, ADNOC's Executive Director of Downstream

Industry, Marketing and Trading, told Reuters.

The state oil company has concluded several deals in gas and

chemicals this year. Last month, it said it was creating XRG to

focus on overseas investments in lower carbon energy, including

gas and chemicals, saying it was valued at more than $80

billion.

The group has also been in talks with Austria's OMV

about a potential merger of Borealis AG and Borouge

.

"The discussions are very positive and moving in the right

direction," Salmeen said.

XRG's board, announced last week, includes Blackstone's Jon

Gray and former BP boss Bernard Looney.

XRG closed a deal with BP this week for a new natural gas

venture in Egypt, with the British oil major holding 51% and XRG

49%.

($1 = 0.9622 euros)