EU Commission expresses reservations regarding Covestro's potential acquisition by Adnoc - EU Commission expresses worries over Covestro's takeover by ADNOC
The European Commission has initiated an in-depth investigation under the Foreign Subsidies Regulation (FSR) into the proposed acquisition of German chemical producer Covestro by Abu Dhabi National Oil Company (ADNOC), due to preliminary concerns that potential subsidies from the United Arab Emirates could distort competition within the EU internal market.
Key details of the Commission’s concerns include:
- Potential subsidies under scrutiny: The Commission is examining an unlimited financial guarantee provided by the UAE government and a significant committed capital increase from ADNOC into Covestro. These subsidies may have allowed ADNOC to acquire Covestro on terms and valuation that would not be achievable under normal market conditions, effectively distorting fair competition by giving ADNOC an unfair advantage over unsubsidised investors.
- Distortion of the EU market: Such subsidies could artificially enhance ADNOC’s financial capacity, discouraging other potential bidders and undermining the level playing field within the EU internal market.
- Impact on future competition: The Commission is also concerned that following the acquisition, ADNOC might pursue investment strategies influenced by these subsidies that could further impact competitive conditions and innovation dynamics in the European chemicals industry.
The deal, valued at around €12 billion (approx. $14.1 billion), was initially cleared by the Commission on competition grounds on 13 May 2025. However, the foreign subsidies aspect triggered this additional probe, which aims to reach a decision by 2 December 2025. The Commission may approve the deal, impose remedies, or prohibit it based on the findings.
ADNOC subsidiary XRG and Covestro are cooperating with the Commission in its review process.
In summary, the EU Commission’s concern is that potential UAE state subsidies could provide ADNOC with an unfair financial edge in acquiring Covestro, potentially harming the balance of competition and market integrity within the EU chemical sector.
- The unlimited financial guarantee from the UAE government and the significant capital increase from ADNOC, which are under scrutiny by the European Commission, could potentially allow ADNOC to acquire Covestro on terms and valuation that are not achievable under normal market conditions, thereby distorting fair competition and giving ADNOC an unfair advantage over unsubsidised investors in the industry.
- The European chemicals industry could be significantly influenced by investment strategies pursued by ADNOC following the acquisition, if these strategies are influenced by the subsidies, potentially impacting competitive conditions and innovation dynamics within the business sector.
