EU Probe Launched Over Covestro Acquisition by ADNOC: Alleged Subsidy Practices in the United Arab Emirates
The European Commission has launched an in-depth investigation under the Foreign Subsidies Regulation (FSR) into the planned takeover of Covestro by the Abu Dhabi National Oil Company (Adnoc) [1][2][3]. The investigation was triggered by concerns about potential subsidies granted by the United Arab Emirates (UAE) that could distort competition in the EU internal market.
The deal, valued at around €12 billion ($14.1 billion), was initially cleared on competition grounds on 13 May 2025. However, the foreign subsidies aspect prompted a new, more thorough investigation that started after the formal notification on 15 May 2025 [1]. The Commission aims to reach a decision by 2 December 2025 [1][2].
The Commission has preliminary concerns regarding an unlimited guarantee from the UAE and a committed capital increase from Adnoc into Covestro, which may have enabled Adnoc to acquire Covesto on terms not aligned with market conditions and that unsubsidized investors could not match [1].
ADNOC's investment unit XRG and Covestro continue to engage constructively and cooperatively with the Commission during this FSR review process [1][2]. This probe reflects the EU’s cautious stance on major mergers involving foreign state-backed investors and highlights concerns about potential competitive distortions from significant government support outside the EU, especially from Middle Eastern firms [2][4].
The investigation is part of the EU's scrutiny of foreign investments under its recently implemented FSR rules to ensure fair market conditions within the Union [1][2][3]. The potential impact of state subsidies on the European internal market is a key focus of the investigation. These subsidies could have potentially discouraged competitors from bidding for Covestro.
It's important to note that the investigation by the EU Commission is not limited to subsidies in the UAE but also extends to potential subsidies for Covestro after the takeover. The Commission is investigating the planned takeover of Covestro by Adnoc, and the Arab state-owned company may have received subsidies during the bidding process for Covestro.
In summary, the European Commission has opened an in-depth investigation into the proposed takeover of Covestro by Adnoc due to concerns about subsidies granted by the UAE possibly distorting competition in the EU internal market. The Commission aims to reach a decision by 2 December 2025, and the possible outcomes include no objection, remedies/commitments acceptance, or transaction prohibition. ADNOC and Covestro are cooperating with the investigation, and the probe reflects the EU’s cautious stance on major mergers involving foreign state-backed investors.
References:
- EU Commission Press Release
- Reuters Article
- Bloomberg Article
- Financial Times Article
In light of the European Commission's investigation under the Foreign Subsidies Regulation (FSR), the community policy on fair trade is being enforced, ensuring no unjust competition in the EU internal market. The Commission's investigation into the planned takeover of Covestro by Adnoc includes scrutiny of potential subsidies that may have affected the business terms, which might have been difficult for unsubsidized investors to match through vocational training or strategic planning.
