Fannie Mae, Freddie Mac shares tumble after conservatorship comments
On Wednesday, Covestro AG (1COV:GR) (OTC: COVTY) experienced a shift in stock rating by Kepler Cheuvreux, moving from "Buy" to "Hold". This change comes with a revised price target set at €62.00, a decrease from the previous target of €65.00. The adjustment follows the recent announcement of a takeover offer by the Abu Dhabi National Oil Company (ADNOC).
On Monday, Covestro confirmed that it had reached an agreement with ADNOC regarding the latter's takeover proposal, which stands at €62 per share. This proposal is expected to lead to a formal offer document released within the next six weeks, initiating the acceptance period for the cash offer. Final regulatory approvals and the closing of the deal are anticipated to occur in the second half of 2025.
As part of the agreement, once the transaction is finalized, Covestro plans to issue new shares equivalent to 10% of its current share capital to ADNOC. The mutual agreement, which has the backing of Covestro's supervisory board, suggests a low probability of receiving a more competitive offer, even if ADNOC does not achieve full control over Covestro.
Kepler Cheuvreux's analysis indicates that given the mutual nature of the agreement and the limited potential for a higher bid, there is restrained opportunity for significant stock price increase. Consequently, the firm has lowered its recommendation for Covestro shares, reflecting the anticipated outcomes of the proposed takeover.
In other recent news, Covestro AG has experienced significant developments, including a downgrade in its stock rating and a substantial acquisition offer.
Jefferies, an analyst firm, has shifted its recommendation for Covestro from Buy to Hold following an acquisition offer from ADNOC. The latter proposes to purchase Covestro's equity at €62 per share, a price mirrored by Jefferies' steady target for the company.
This offer, backed by Covestro's board, is contingent on achieving a minimum acceptance threshold of 50% plus one share. Importantly, the proposed acquisition is not anticipated to encounter major antitrust or regulatory barriers, given the minimal operational intersections between Covestro and ADNOC.
As part of the agreement, ADNOC will support Covestro's Sustainable Future strategy, financed by a capital increase post-deal. ADNOC also commits to maintaining Covestro's business operations and corporate governance, including the current board structure and existing agreements with German works councils, until at least the end of 2028.
These recent developments mark a pivotal moment for Covestro, potentially reshaping its ownership structure while ensuring its strategic and operational continuity post-transaction.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Covestro's financial position and market performance, providing context to the recent takeover offer and rating change. The company's market capitalization stands at $12.13 billion, reflecting its significant presence in the chemical industry.
Despite the recent rating downgrade, Covestro's stock has shown strong performance, with a 21.43% price total return over the past year. The stock is currently trading near its 52-week high, with its price at 98.19% of the highest point reached in the last year. This aligns with the takeover offer price of €62 per share, suggesting that the market has largely priced in the potential acquisition.
InvestingPro Tips highlight that while Covestro is not currently profitable over the last twelve months, analysts predict the company will be profitable this year. This expectation of improved financial performance could be a factor in ADNOC's interest in acquiring the company.
For investors seeking more comprehensive analysis, InvestingPro offers 7 additional tips for Covestro, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.