July 29, 2025 17:29

The European Commission has opened an in-depth investigation into oil and petrochemical Abu Dhabi National Oil Co. (ADNOC)’s planned takeover of the German chemical group Covestro. The deal had already secured a favorable antitrust opinion from EU regulators in May.

Brussels is focusing on whether foreign subsidies granted by the United Arab Emirates government—including an unlimited state guarantee for ADNOC and a capital increase in Covestro that ADNOC has committed to subscribe—could have distorted competition within the EU’s single market.

The Commission fears these subsidies may have enabled ADNOC to submit an acquisition bid on financial terms not aligned with market conditions—terms that unsubsidized bidders could not match. It also considers that such support might influence the group’s future investment strategy, with potentially negative repercussions for competitive dynamics in the EU.

During the course of its inquiry, the Commission will examine two key questions: whether the foreign subsidies actually altered the outcome of the takeover procedure—making ADNOC’s offer too high for unsubsidized competitors to rival—and whether, post-merger, the operation will have adverse effects on the internal market.

The transaction was notified to the Commission on May 15, 2025. The Commission now has 90 working days, until Dec. 2, 2025, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

In force since July 12, 2023, the Foreign Subsidies Regulation empowers the Commission to address distortions caused by public support from third-country governments, ensuring a level playing field in the single market while remaining open to foreign investment. Under the regulation, mergers must be notified to the Commission if at least one participating company is established in the EU and has generated turnover exceeding €500 million, and if the parties have received at least €50 million in aggregate foreign financial contributions in the three years preceding the transaction.

The ADNOC-Covestro merger is now in its final stage: Following the completion of the takeover bid at the end of last year, ADNOC International Germany Holding—indirectly controlled by XRG (formerly Adnoc International, the group’s overseas investment arm)—has acquired more than 91 percent of Covestro’s share capital, at a value of approximately €14.7 billion.

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