The anticipated takeover of Covestro by Abu Dhabi National Oil Co. (Adnoc) is gaining momentum, despite challenges related to declining stock prices and low commodity valuations for the German polymer materials firm. Analysts at Berenberg have assigned an 80% likelihood to the success of this acquisition, although it appears that the European summer holiday may have introduced certain delays in ongoing negotiations.
Discussions became concrete in late June, centering around Adnoc's initial offer of 62.00 euros per share. Berenberg has noted a commendable level of discretion displayed by both parties, as no information leaks to the media have surfaced since these discussions commenced. In Covestro's second-quarter earnings release, the company confirmed that confirmatory due diligence related to this potential transaction began in July.
Analysts are optimistic, predicting that more detailed developments will be disclosed by late August or early September. Once an agreement is finalized, Berenberg anticipates that the acceptance threshold for the deal will be set relatively low, and a domination agreement seems unlikely. They highlighted that Adnoc's approach thus far has been characterized as 'gentle', which points towards a collaborative atmosphere in negotiations.
Berenberg expressed confidence that neither party would risk jeopardizing the acquisition by quarreling over a mere EUR1 or EUR2 fluctuation from the stated offer of EUR62 per share, as highlighted in the press release from June 24. The analysts speculate that Adnoc may aim to leverage Covestro in establishing a comprehensive global chemicals platform.
Concurrently, Covestro's management is likely aware that the break price may only slightly exceed EUR40 per share, a figure well below the current market value. The firm maintained its hold rating for Covestro, setting a price target of 58.00 euros, expecting that a combination of increased production volumes and reduced energy costs will lead to a modest improvement in the company's EBITDA for the fiscal year 2024. As of the latest reports on Friday morning, Covestro’s shares experienced a slight uptick in Frankfurt trading, reflecting ongoing investor interest amid the acquisition news..