European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>ADNOC International (XRG) secured a controlling 69.94% stake in Covestro after the initial acceptance period, surpassing the 50% plus one share threshold.</li>
<li>Regulatory Approvals Pending: The transaction awaits merger control, foreign investment, and EU Foreign Subsidies Regulation clearances, with finalization expected in H2 2025 (usual timeline for deal in the chemical industry).</li>
<li>Remaining shareholders can tender their shares during the additional acceptance period; squeeze-out is likely. Recommendation is tender.</li>
</ul>


ADNOC International (XRG) secured a controlling 69.94% stake in Covestro after the initial acceptance period, surpassing the 50% plus one share threshold.
Regulatory Approvals Pending: The transaction awaits merger control, foreign investment, and EU Foreign Subsidies Regulation clearances, with finalization expected in H2 2025 (usual timeline for deal in the chemical industry).
Remaining shareholders can tender their shares during the additional acceptance period; squeeze-out is likely. Recommendation is tender.


<ul>
<li>ADNOC offers €62/share (54% premium), valuing Covestro at €11.7 billion, with high likelihood of completion despite regulatory and market conditions, closing expected in H2 2025.</li>
<li>Potential additional offer period will run until December 16. ADNOC partnership offers access to cheaper resources, and supports future growth amid sector challenges and consolidation opportunities in Europe.</li>
<li>The ADNOC acquisition offers a strong value realization opportunity for shareholders amidst market uncertainty. Gross spread is 6.7%. Long and accept offer.</li>
</ul>


ADNOC offers €62/share (54% premium), valuing Covestro at €11.7 billion, with high likelihood of completion despite regulatory and market conditions, closing expected in H2 2025.
Potential additional offer period will run until December 16. ADNOC partnership offers access to cheaper resources, and supports future growth amid sector challenges and consolidation opportunities in Europe.
The ADNOC acquisition offers a strong value realization opportunity for shareholders amidst market uncertainty. Gross spread is 6.7%. Long and accept offer.


<ul>
<li>At last, Covestro signed an Investment Agreement with ADNOC for an all-cash €62.00/share offer (same as June proposal), 54% premium to June 2023, €11.7 billion implied equity value.. </li>
<li>The offer represents 9.1x EV/Fwd NTM EBITDA (vs. peers at 8.3x), 7.4x 26e EBITDA and 1.8x P/BVPS. The share price implies 6.4% gross spread and 66% probability of deal completion.</li>
<li>The agreement is well-crafted and now has a strong likelihood of reaching a successful completion, although there is a lengthy period before completion and likely political opposition. Long.
</li>
</ul>


At last, Covestro signed an Investment Agreement with ADNOC for an all-cash €62.00/share offer (same as June proposal), 54% premium to June 2023, €11.7 billion implied equity value.. 
The offer represents 9.1x EV/Fwd NTM EBITDA (vs. peers at 8.3x), 7.4x 26e EBITDA and 1.8x P/BVPS. The share price implies 6.4% gross spread and 66% probability of deal completion.
The agreement is well-crafted and now has a strong likelihood of reaching a successful completion, although there is a lengthy period before completion and likely political opposition. Long.



<ul>
<li>On 24 June, <a href="https://www.smartkarma.com/entities/covestro-ag" target="_blank" data-smartkarma-citation="entities:21574:1" rel="noopener">Covestro AG (1COV GR)</a> confirmed it has decided to enter into concrete negotiations with ADNOC regarding a potential transaction at an indicative €62/share (9.6x EV/fwd NTM EBITDA).</li>
<li>Covestro is trading at 8x (vs. 6.5x median of peers). To justify €70/share (sought last December), Covestro should overdeliver, but analysts and market are somehow skeptical about that.</li>
<li>Considering a takeout price of €62, gross spread is 12.1% and the shares are pricing a 32.5% probability of deal completion.</li>
</ul>


On 24 June, Covestro AG (1COV GR) confirmed it has decided to enter into concrete negotiations with ADNOC regarding a potential transaction at an indicative €62/share (9.6x EV/fwd NTM EBITDA).
Covestro is trading at 8x (vs. 6.5x median of peers). To justify €70/share (sought last December), Covestro should overdeliver, but analysts and market are somehow skeptical about that.
Considering a takeout price of €62, gross spread is 12.1% and the shares are pricing a 32.5% probability of deal completion.


Adnoc/Covestro: Fresh Takeover Negotiations and Valuation Scenarios

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>Reportedly, Ito Junro's MBO for <a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">Seven &amp; I (3382 JP)</a> includes a US assets IPO to help pay down MBO debt to Japanese banks.  Possible strategic mistake by Ito-san here.</li>
<li>Starwood/Warburg Pincus' firm Offer for <a href="https://www.smartkarma.com/entities/esr-group-ltd" target="_blank" data-smartkarma-citation="entities:27983:1" rel="noopener">ESR Group (1821 HK)</a> secures support from 30.79% of the register.</li>
<li>We may be wrong on <a href="https://www.smartkarma.com/entities/sanrio-co-ltd" target="_blank" data-smartkarma-citation="entities:16476:1" rel="noopener">Sanrio (8136 JP)</a> by a big factor but the multiple and the concentration risk of momentum factor means you are in an illiquid stock.</li>
</ul>


Reportedly, Ito Junro's MBO for Seven &amp; I (3382 JP) includes a US assets IPO to help pay down MBO debt to Japanese banks.  Possible strategic mistake by Ito-san here.
Starwood/Warburg Pincus' firm Offer for ESR Group (1821 HK) secures support from 30.79% of the register.
We may be wrong on Sanrio (8136 JP) by a big factor but the multiple and the concentration risk of momentum factor means you are in an illiquid stock.


Last Week in Event SPACE: Seven & I Holdings, ESR Group, Sanrio, HKBN

Germany

Covestro AG manufactures polymers and high performance plastics.  The Company  manufactures, markets, and distributes coatings, adhesives, insulating materials, sealants,  polycarbonates, and polyurethanes. Covestro markets its products to industries including  automotive, construction, health, electronics, and medical engineering.

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Covestro AG (1COV GR)

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David Blennerhassett

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ADNOC/Covestro: Offer Results Update

ADNOC International (XRG) secured a controlling 69.94% stake in Covestro after the initial acceptance period, surpassing the 50% plus one share...

Jesus Rodriguez Aguilar

ADNOC/Covestro: Almost Game Over

ADNOC offers €62/share (54% premium), valuing Covestro at €11.7 billion, with high likelihood of completion despite regulatory and market...

Jesus Rodriguez Aguilar

ADNOC/Covestro: Fair Offer at €62

​Covestro signs Investment Agreement with ADNOC for €62.00/share offer, representing a 54% premium and strong likelihood of successful completion...

Jesus Rodriguez Aguilar

Adnoc/Covestro: Fresh Takeover Negotiations and Valuation Scenarios

Covestro is trading at 8x (vs. 6.5x median of peers). To justify €70/share (sought last December), Covestro should overdeliver, but analysts and...

Jesus Rodriguez Aguilar

Last Week in Event SPACE: Seven & I Holdings, ESR Group, Sanrio, HKBN

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

Covestro signs Investment Agreement with ADNOC for €62.00/share offer, representing a 54% premium and strong likelihood of successful completion...