The European Commission has given conditional approval to plans by Abu Dhabi's state-owned Adnoc to acquire German chemicals group Covestro under the EU's foreign subsidies regulation (FSR).
Adnoc, to address the commission's competition concerns relating to state subsidies, offered to adapt its articles of association to make sure they align with UAE insolvency law, thereby removing unlimited guarantee from the state. It will also share Covestro's sustainability patents with certain market participants.
"Clear, predefined access to these patents will enable others to innovate and advance research in an area that is critical for Europe's future," commission executive vice president Teresa Ribera said.
The commission said these commitments "will balance out the negative effects" of the €12bn ($13.9bn) Adnoc-Covestro deal in the EU market.
During an in-depth investigation, the commission found that "Adnoc and Covestro received foreign subsidies from the UAE that are liable to distort the EU internal market." These subsidies include an unlimited state guarantee to Adnoc, as well as a committed capital increase from Adnoc into Covestro.
"As a result, the merged entity could have engaged in more aggressive investment strategies than absent the subsidies, to the detriment of other market participants and competitive conditions in the internal market," the commission said.
The commission gave the green light to the acquisition in May, but decided to launch an in-depth probe in July under the FSR because of competition concerns relating to state subsidies.
The FSR began in July 2023 and allows the commission to address distortion caused by foreign subsidies as a way of ensuring a laying playing field for all companies in the EU market.
