Adnoc's Covestro Takeover Faces EU Market Probe

The European Commission has opened a thorough investigation into Abu Dhabi National Oil Company's (Adnoc) 14.7 billion Euros ( USD 16.4 billion) acquisition of German chemicals company Covestro, on the grounds of possible distortions of the EU market on account of foreign subsidies.

The investigation, announced on Monday, follows preliminary results that indicate the Emirati state-owned oil giant may have enjoyed financial backing from the UAE government that would distantly affect the deal.

“The commission particularly complained about an unlimited guarantee from the UAE and a committed capital increase by Adnoc into Covestro. These actions might have helped Adnoc close the deal on terms not in accordance with market conditions," the statement said.

Key Highlights:

• EU's probe focuses on whether Adnoc’s financial backing from the UAE enabled the company to offer above-market terms for Covestro’s acquisition
• The investigation marks one of the first major tests under the EU’s Foreign Subsidies Regulation, active since July 2023
• Regulators aim to determine if the deal could distort fair competition within the EU’s single market due to non-transparent state support

 “The advance warnings imply that the foreign subsidies could have allowed Adnoc to pay for Covestro at a valuation and financial terms that would be inconsistent with market conditions, and that could not otherwise have been matched by unsubsidised investors," the commission stated.

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Adnoc, through its investment arm XRG (previously Adnoc International), acquired 91.3 percent of Covestro's shares in December 2024. Nevertheless, the acquisition is yet to gain regulatory approval. The commission will now investigate if the alleged financial assistance skewed the acquisition results and if the acquisition would harm the competitiveness of the EU single market.

The investigation is a major test of the EU foreign subsidies regime, which entered into effect in July 2023, with the aim of maintaining open EU markets and fair competition while preventing unfair subsidy-driven advantages. The last date for the final decision has been set on December 2.