The European Commission has opened an in-depth investigation under the Foreign Subsidies Regulation (FSR) to assess the acquisition by Abu Dhabi's state-controlled Adnoc of German chemical manufacturer Covestro.
The commission said it has "preliminary concerns" that subsidies granted by the UAE could distort the EU internal market, it said today.
It flagged an unlimited guarantee from the UAE, as well as a committed capital increase from Adnoc into Covestro, as possible foreign subsidies. These "may have enabled Adnoc to acquire Covestro at a valuation and financial terms that would not be in line with market conditions, and which could not have been matched by unsubsidised investors," the commission said.
It also expressed concerns that the deal could allow Adnoc to adopt investment strategies following the transaction that would affect competitive conditions in the EU's internal market.
The commission cleared the around around €12bn ($14.1bn) deal on 13 May, saying it would not raise competition concerns.
Companies must notify the commission under the EU's foreign subsidies regulation when certain conditions are met. The transaction was notified to the commission on 15 May, it said.
Following a preliminary investigation, the commission will now begin an in-depth investigation, aiming to take a decision by 2 December 2025. At the end of the investigation the commission may either issue a no-objection decision, accept commitments proposed by the company to remedy any distortion, or prohibit the deal.
Adnoc subsidiary XRG and Covestro "continue to be in constructive discussions with the European Commission and are working co-operatively towards a conclusion of the authority's FSR review," Covestro said today.
