EU probes UAE oil giant's $16B German chemicals takeover The European Commission launched an in-depth investigation on Monday into Abu Dhabi National Oil Company's 14.7 billion euro takeover of German chemicals firm Covestro, citing concerns that foreign subsidies from the United Arab Emirates could distort competition in the EU's internal market. This marks the first major test of the bloc's Foreign Subsidies Regulation for a Gulf state-backed acquisition. The Commission has preliminarily identified two potential foreign subsidies that may have given ADNOC an unfair advantage: an unlimited guarantee from the UAE government and a committed capital increase by the state-owned oil giant into Covestro. These subsidies may have enabled ADNOC to offer acquisition terms "that would not be in line with market conditions" and could not have been matched by unsubsidized competitors. Foreign Subsidies Under EU Scrutiny The investigation centers on whether these state benefits allowed ADNOC to submit an unusually high bid that deterred other potential investors from making competing offers. The Commission will also examine whether such subsidies could lead to negative effects in the internal market through the merged entity's post-transaction activities. The deal was formally notified to the Commission on May 15, triggering the current 90-working-day review period that must conclude by December 2. While ADNOC received unconditional approval under traditional EU merger rules in May, the Foreign Subsidies Regulation review represents a separate hurdle focused specifically on state support distortions. Landmark Case for Gulf Investment The case represents a significant test of EU regulations for Middle Eastern state-backed investments. According to Gulf News, this isn't the first time UAE entities have faced such scrutiny - Emirates Telecommunications had to drop an unlimited state guarantee and offer commitments to secure EU approval for its 2.2 billion euro PPF Telecom deal in 2023. The Foreign Subsidies Regulation, which took effect in July 2023, was designed to address a gap in EU competition law by targeting foreign state subsidies that previously escaped oversight. The Commission now has until December 2 to either accept remedies, prohibit the concentration, or issue a no-objection decision. For ADNOC, the Covestro acquisition represents its largest-ever deal and a strategic move to diversify beyond oil into high-performance polymers used in sectors ranging from electric vehicles to smartphones. The UAE oil giant sees Covestro as a foundational platform for its performance materials and specialty chemicals business.
