Covestro close to granting Adnoc in-depth due diligence - report

Covestro is reportedly close to granting Abu Dhabi National Oil Co. access to in-depth due diligence in expectation of an improved takeover bid, signalling fresh impetus for the talks between both parties after a year of negotiations.

Bloomberg cited people familiar with the matter as saying the German company plans to hold a supervisory board meeting on Wednesday to discuss the issue. It was understood that both firms made progress in recent weeks hashing out key aspects of a combination.

Adnoc has signalled it may slightly sweeten its latest non-binding offer of €60 per share - equivalent to €11.3bn ($12bn) - should the due diligence go well, sources told Bloomberg.

It was understood that the in-depth due diligence, if granted, will likely take place this month and any potential bump would only come in July. Covestro was said to be hoping that it may lead Adnoc to sweeten its bid by around €1 or €2 per share.

Such a step would break an impasse after Adnoc’s most recent bid failed to win over some parts of Covestro’s supervisory board, which refused to give the Abu Dhabi-based energy giant access to core parts of the data room, people familiar with the matter said late last year.

Bloomberg reported earlier this year that to work around the deadlock, Covestro responded to hundreds of questions about its operations Adnoc had asked for. But with the lack of tangible progress to getting a deal done, Covestro’s share price has declined since, increasing pressure on the firm’s management.

A representative for Adnoc declined to comment to Bloomberg while a spokesperson for Covestro said the company is in ongoing discussions with Adnoc "in accordance with our constructive and open-minded manner and in the interests of our company, our shareholders interests of our company, our shareholders and all other stakeholders".

"As usual, the progress and outcome and the outcome of such discussions will depend on the ability of both parties to agree to agree on issues where they have differing views," the spokesperson said. "We will continue to report on the outcome of our discussions."

Earlier on Tuesday, markets blog Betaville said in an "uncooked alert" that Adnoc may have rekindled takeover talks with Covestro. It said there was speculation that Adnoc had recently been tapping up lenders for a debt financing package.

At 1220 BST, the shares were up 6.9% at €51.84.