Abu Dhabi National Oil Sidesteps Hedge Funds With Covestro Bid - Bloomberg
The first question at the beginning of any German takeover is what the ending looks like. Buying a Frankfurt-listed company is typically a tortuous process which can see hedge funds push for a higher price and workers and politicians cry foul. Abu Dhabi National Oil Co.’s €12 billion ($13 billion) offer for Covestro AG may yet succeed in sidestepping both hurdles — and pave the way for more inbound acquisitions.
First, the technical problem. Corporate and private equity bidders often seek to get 75% ownership of German targets, the voting level where they’re able to implement a so-called domination agreement enabling them to dictate strategy and gain direct access to cash flow. That allows merger arbitrageurs to force bidders to pay up for the last bucket of shares that will get the suitor over that threshold.
But Adnoc isn’t a conventional industrial buyer needing to micromanage the company and harvest synergies by integrating Covestro into its wider operations. To the contrary, it wants to keep current management in place and continue with the firm’s existing strategy. The buyer’s goal here is diversification — downstream into chemicals, and away from oil.
Nor does wealthy Adnoc need control over the cash flow to finance leverage in the way a private equity bidder would. The opposite is the case; it’s injecting €1.2 billion. Hence Adnoc can from the outset forswear the desire for any domination agreement. It’s content to settle for a 50%-plus-one-share holding. A follow-on offer to delist Covestro may eventually be forthcoming, but there appears to be less scope here for fireworks than in past German transactions.
What about the price? The €62-a-share offer is 54% above Covestro’s level in June 2023 before Bloomberg News reported takeover interest. Equity markets may have gained since then, but shares of many of Covestro’s chemicals peers have gone sideways. The premium is genuinely high. A deal has been anticipated for many months, and the agreed price is still 8% more than Monday’s close and 35% over analysts’ average price target for Covestro before talks became public.
At €15 billion including assumed net debt, the transaction is worth over nine times predicted earnings before interest, tax, depreciation and amortization. That compares with BASF SE’s forward trading multiple of seven times. The trickier issue is ostensibly the politics of a foreign sovereign takeover of a key player in the German chemicals sector at a time when the country’s industrial sector is struggling more broadly. But an acquisition that supports incumbent management and comes with a simultaneous investment commitment is going to be harder to challenge. Would Covestro’s existing public-market shareholders want to invest so much? The share price would go the other way if they were asked.
Germany has many decent industrial assets trading with weak share prices. And there’s a lot of acquisitive capital, in particular in the hands of Gulf sovereign buyers, looking for a home. This transaction has been a long time coming, and of course there remains uncertainty ahead of closing. Still, it could be a watershed deal that encourages more to follow.
Tuesday, 1 October 2024
EFG Holding eyes opening regional headquarters in Saudi Arabia
EFG Holding eyes opening regional headquarters in Saudi Arabia
EFG Holding is considering establishing a regional headquarters in Saudi Arabia, CEO Karim Awad told Al Borsa News.
Awad emphasized the strategic importance of the Saudi market, which is one of four key markets for the company, alongside the UAE, Egypt, and Kuwait.
He also noted that EFG Holding is exploring investment opportunities in Gulf markets, particularly in activities related to offerings, brokerage, and asset management.
The company recently exited some emerging markets to concentrate on its core markets, where it has established a significant presence and increased its number of offerings.
EFG Holding is considering establishing a regional headquarters in Saudi Arabia, CEO Karim Awad told Al Borsa News.
Awad emphasized the strategic importance of the Saudi market, which is one of four key markets for the company, alongside the UAE, Egypt, and Kuwait.
He also noted that EFG Holding is exploring investment opportunities in Gulf markets, particularly in activities related to offerings, brokerage, and asset management.
The company recently exited some emerging markets to concentrate on its core markets, where it has established a significant presence and increased its number of offerings.
Lulu Group expected to abandon Tadawul leg of IPO: IFR
Lulu Group expected to abandon Tadawul leg of IPO: IFR
UAE supermarket operator Lulu Group is expected to opt for a single listing on the Abu Dhabi Exchange having previously pursued a dual listing with Saudi Arabia’s Tadawul.
Bankers involved with the deal said the shift was no reflection of markets or investor demand and simply a product of difficulties coordinating with two regulators.
One banker said the Tadawul listing is still seen as desirable and could be pursued at a later date.
A second banker said there were no discussions on changing the size of the deal or pricing, though there would be slightly less Saudi participation due to the loss of a local retail offer and some domestic-focused funds.
The second banker remained confident on demand, referencing a number of recent reverse enquiries.
The deal is on course to be one of the largest in the UAE this year with expectations of an around US$1.5bn-equivalent offer.
Abu Dhabi Commercial Bank, Citigroup, Emirates NBD and HSBC are running the deal.
A successful dual listing between ADX and Tadawul previously took place in 2022 with Americana Restaurants' US$1.8bn IPO.
The deal benefited from having Saudi Arabia’s Public Investment Fund as a joint issuer although the process required considerable preparatory work and a trading debut was delayed by a week.
UAE supermarket operator Lulu Group is expected to opt for a single listing on the Abu Dhabi Exchange having previously pursued a dual listing with Saudi Arabia’s Tadawul.
Bankers involved with the deal said the shift was no reflection of markets or investor demand and simply a product of difficulties coordinating with two regulators.
One banker said the Tadawul listing is still seen as desirable and could be pursued at a later date.
A second banker said there were no discussions on changing the size of the deal or pricing, though there would be slightly less Saudi participation due to the loss of a local retail offer and some domestic-focused funds.
The second banker remained confident on demand, referencing a number of recent reverse enquiries.
The deal is on course to be one of the largest in the UAE this year with expectations of an around US$1.5bn-equivalent offer.
Abu Dhabi Commercial Bank, Citigroup, Emirates NBD and HSBC are running the deal.
A successful dual listing between ADX and Tadawul previously took place in 2022 with Americana Restaurants' US$1.8bn IPO.
The deal benefited from having Saudi Arabia’s Public Investment Fund as a joint issuer although the process required considerable preparatory work and a trading debut was delayed by a week.
#AbuDhabi's ADNOC to buy German chemicals firm Covestro for $16 bln | Reuters
Abu Dhabi's ADNOC to buy German chemicals firm Covestro for $16 bln | Reuters
Abu Dhabi's ADNOC has struck a deal to buy German chemicals maker Covestro (1COV.DE), opens new tab for 14.7 billion euros ($16.3 billion), including debt, in the energy giant's biggest ever acquisition.
The deal is one of the largest foreign takeovers by a Gulf state as countries in the region seek to reduce their dependence on oil amid the global switch to cleaner energy.
It also comes at a sensitive time in Germany for foreign acquisitions, as Commerzbank and the government seek to fend off interest in the bank from Italy's UniCredit.
The 62 euros-per-share cash deal, which will also see ADNOC take on about 3 billion euros in debt, follows protracted negotiations and is a cornerstone of the energy giant's drive to grow in petrochemicals along with gas and renewable energy.
ADNOC said that when the transaction closes it would also buy 1.17 billion euros worth of new shares in Covestro to improve funding at the former Bayer (BAYGn.DE), opens new tab unit.
"We believe that the fundamentals of chemicals are strong," Khaled Salmeen, ADNOC head of downstream, marketing, and trading, told Reuters, adding he saw Covestro as a platform for growth.
"This sector, and specifically Covestro's space in the sector, will grow higher than GDP from now to 2050," he added.
Shares in Covestro, which makes plastics and chemicals for the automotive, construction and engineering sectors, jumped 3.7% to a three-year high of 58 euros.
ADNOC has also been in talks with Austria's OMV to merge their petrochemical joint ventures Borealis and Borouge. ADNOC took a 24.9% stake in OMV from Abu Dhabi sovereign fund Mubadala in February.
Covestro was created in 2015 after being spun off from Bayer. It opened its books to ADNOC in June - a year after ADNOC's initial interest was reported.
The takeover offer will be subject to a minimum acceptance threshold of 50% plus one share of Covestro's capital.
Abu Dhabi's ADNOC has struck a deal to buy German chemicals maker Covestro (1COV.DE), opens new tab for 14.7 billion euros ($16.3 billion), including debt, in the energy giant's biggest ever acquisition.
The deal is one of the largest foreign takeovers by a Gulf state as countries in the region seek to reduce their dependence on oil amid the global switch to cleaner energy.
It also comes at a sensitive time in Germany for foreign acquisitions, as Commerzbank and the government seek to fend off interest in the bank from Italy's UniCredit.
The 62 euros-per-share cash deal, which will also see ADNOC take on about 3 billion euros in debt, follows protracted negotiations and is a cornerstone of the energy giant's drive to grow in petrochemicals along with gas and renewable energy.
ADNOC said that when the transaction closes it would also buy 1.17 billion euros worth of new shares in Covestro to improve funding at the former Bayer (BAYGn.DE), opens new tab unit.
"We believe that the fundamentals of chemicals are strong," Khaled Salmeen, ADNOC head of downstream, marketing, and trading, told Reuters, adding he saw Covestro as a platform for growth.
"This sector, and specifically Covestro's space in the sector, will grow higher than GDP from now to 2050," he added.
Shares in Covestro, which makes plastics and chemicals for the automotive, construction and engineering sectors, jumped 3.7% to a three-year high of 58 euros.
ADNOC has also been in talks with Austria's OMV to merge their petrochemical joint ventures Borealis and Borouge. ADNOC took a 24.9% stake in OMV from Abu Dhabi sovereign fund Mubadala in February.
Covestro was created in 2015 after being spun off from Bayer. It opened its books to ADNOC in June - a year after ADNOC's initial interest was reported.
The takeover offer will be subject to a minimum acceptance threshold of 50% plus one share of Covestro's capital.
#Qatar Airways buys into Virgin Australia, raising the stakes against Qantas | Reuters
Qatar Airways buys into Virgin Australia, raising the stakes against Qantas | Reuters
Qatar Airways will buy a 25% stake in Virgin Australia from U.S. private equity firm Bain Capital, posing a tougher contest for Qantas Airways (QAN.AX), opens new tab that has dominated Australian routes and pushed back against giving access to the Middle Eastern carrier.
The purchase of the minority stake for an undisclosed amount will need to be signed off by Australia's government, which denied Qatar Airways' requests last year to fly additional services into Sydney, Melbourne, Brisbane and Perth.
"This partnership brings the missing piece to Virgin Australia's longer-term strategy," Virgin Australia CEO Jayne Hrdlicka said in a statement.
"It means that we've got an important shareholder who has a scale that we don't have, who has the expertise that we don't have, that can help us compete better domestically by giving us access to that scale," Hrdlicka said later in an interview with ABC television on Tuesday.
Shares in Qantas fell as much as 4.3% by 0239 GMT and were among the worst performers on the benchmark S&P/ASX 200 index.
The stake sale also serves as a cornerstone investment ahead of an anticipated return of Virgin Australia into public ownership, the companies said.
Bain said last year it would explore an IPO of Virgin Australia, which it bought for A$3.5 billion ($2.42 billion) including liabilities after it was placed in voluntary administration in 2020.
Qatar Airways will buy a 25% stake in Virgin Australia from U.S. private equity firm Bain Capital, posing a tougher contest for Qantas Airways (QAN.AX), opens new tab that has dominated Australian routes and pushed back against giving access to the Middle Eastern carrier.
The purchase of the minority stake for an undisclosed amount will need to be signed off by Australia's government, which denied Qatar Airways' requests last year to fly additional services into Sydney, Melbourne, Brisbane and Perth.
"This partnership brings the missing piece to Virgin Australia's longer-term strategy," Virgin Australia CEO Jayne Hrdlicka said in a statement.
"It means that we've got an important shareholder who has a scale that we don't have, who has the expertise that we don't have, that can help us compete better domestically by giving us access to that scale," Hrdlicka said later in an interview with ABC television on Tuesday.
Shares in Qantas fell as much as 4.3% by 0239 GMT and were among the worst performers on the benchmark S&P/ASX 200 index.
The stake sale also serves as a cornerstone investment ahead of an anticipated return of Virgin Australia into public ownership, the companies said.
Bain said last year it would explore an IPO of Virgin Australia, which it bought for A$3.5 billion ($2.42 billion) including liabilities after it was placed in voluntary administration in 2020.
Most Gulf markets fall on geopolitics, weak oil | Reuters
Most Gulf markets fall on geopolitics, weak oil | Reuters
Most stock markets in the Gulf ended lower on Tuesday amid rising geopolitical tensions in the region, while retreating oil prices added to the pressure.
Israel said commando and paratroop units launched raids into Lebanon on Tuesday as part of a "limited" ground incursion, while Iran-backed Hezbollah said it had fired a barrage of missiles into Israel, including at its spy agency near Tel Aviv.
The raids by Israeli troops in southern Lebanon that began overnight went only a short distance over the border, an Israeli security official said, adding that no direct clashes with Hezbollah fighters were reported.
Hezbollah's media relations chief Mohammad Afif denied Israel's claim its forces had entered Lebanon.
Dubai's main share index (.DFMGI), opens new tab dropped 0.6%, weighed down by a 2.3% fall in blue-chip developer Emaar Properties (EMAR.DU), opens new tab and a 2% decline in utility Dubai Electricity and Water Authority (DEWAA.DU), opens new tab.
In Abu Dhabi, the index (.FTFADGI), opens new tab was down 0.2%.
Oil prices - a catalyst for the Gulf's financial markets - edged lower as a stronger supply outlook and tepid global demand growth outweighed fears over escalating conflict in the Middle East and its impact on crude exports from the region.
Saudi Arabia's benchmark index (.TASI), opens new tab closed 0.2% higher, with aluminium products manufacturer Al Taiseer Group (4143.SE), opens new tab gaining 0.2%.
Meanwhile, Federal Reserve Chair Jerome Powell indicated on Monday the U.S. central bank would likely stick with quarter-percentage-point interest rate cuts moving forward and was not "in a hurry" after new data boosted confidence in economic growth and consumer spending.
The Qatari index (.QSI), opens new tab added 0.2%, helped by a 0.3% rise in the Gulf's biggest lender Qatar National Bank (QNBK.QA), opens new tab.
Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab advanced 0.9%, with Commercial International Bank (COMI.CA), opens new tab finishing 2.2% higher.
A forum set up by Egypt's president began discussing on Monday a possible shift in the country's subsidy programme towards paying cash directly instead of offering food products at reduced prices, a system many economists say could be more efficient.
Israel said commando and paratroop units launched raids into Lebanon on Tuesday as part of a "limited" ground incursion, while Iran-backed Hezbollah said it had fired a barrage of missiles into Israel, including at its spy agency near Tel Aviv.
The raids by Israeli troops in southern Lebanon that began overnight went only a short distance over the border, an Israeli security official said, adding that no direct clashes with Hezbollah fighters were reported.
Hezbollah's media relations chief Mohammad Afif denied Israel's claim its forces had entered Lebanon.
Dubai's main share index (.DFMGI), opens new tab dropped 0.6%, weighed down by a 2.3% fall in blue-chip developer Emaar Properties (EMAR.DU), opens new tab and a 2% decline in utility Dubai Electricity and Water Authority (DEWAA.DU), opens new tab.
In Abu Dhabi, the index (.FTFADGI), opens new tab was down 0.2%.
Oil prices - a catalyst for the Gulf's financial markets - edged lower as a stronger supply outlook and tepid global demand growth outweighed fears over escalating conflict in the Middle East and its impact on crude exports from the region.
Saudi Arabia's benchmark index (.TASI), opens new tab closed 0.2% higher, with aluminium products manufacturer Al Taiseer Group (4143.SE), opens new tab gaining 0.2%.
Meanwhile, Federal Reserve Chair Jerome Powell indicated on Monday the U.S. central bank would likely stick with quarter-percentage-point interest rate cuts moving forward and was not "in a hurry" after new data boosted confidence in economic growth and consumer spending.
The Qatari index (.QSI), opens new tab added 0.2%, helped by a 0.3% rise in the Gulf's biggest lender Qatar National Bank (QNBK.QA), opens new tab.
Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab advanced 0.9%, with Commercial International Bank (COMI.CA), opens new tab finishing 2.2% higher.
A forum set up by Egypt's president began discussing on Monday a possible shift in the country's subsidy programme towards paying cash directly instead of offering food products at reduced prices, a system many economists say could be more efficient.