Brussels takes hard look at Adnoc’s Covestro buy: The European Commission launched an in-depth probe into Abu Dhabi National Oil Company’s (Adnoc) EUR 14.7 bn planned buyout of German chemicals maker Covestro, citing concerns that foreign subsidies from the UAE government may distort competition within the the bloc, it said in a statement. The commission has until Tuesday, 2 December to clear, block or impose remedies on the takeover.

REMEMBER- The potential takeover has been under review for the past few months, after it was briefly suspended in June and resumed earlier this month.

Breaking down the jargon: The probe focuses on whether UAE state support gives Adnoc an unfair edge, first by enabling it to outbid unsubsidized rivals in the acquisition process, and second by potentially allowing the combined Adnoc-Covestro entity to compete on terms not available to EU-based peers, thereby distorting the internal market post-acquisition.

The move underscores an increasingly cautious stance by EU regulators towards large, state-backed acquisitions from the Middle East. Emirates Telecommunications Group (e&) was also subject to an EU probe last year for its acquisition of a controlling stake in PPF Telecom, which later saw the transaction cleared after the telco committed to scrapping an unlimited state guarantee and to not funnel any state funding into PPF’s EU operations without EU review.

This is in a bid to uphold fair competition standards: The probe is an application of the EU’s new Foreign Subsidies Regulation (FSR), which came into effect in July 2023 to ensure a level playing field for companies operating in the bloc.

Adnoc is not too concerned: “While we respect the European Commission’s process, we contest the preliminary findings of the Commission and are confident that when the facts are fully examined there will be no reason to hold up clearance of a transaction that will add great value for all stakeholders and stimulate European industry,” an Adnoc spokesperson said in a statement cited by Bloomberg. The commission has yet to outright block a transaction under the FSR.

What’s next? arm XRG and Covestro are in constructive talks with the European Commission to work towards a conclusion of the review, Covestro said in an emailed statement to Bloomberg.

Background: The state-owned oil giant’s investment arm XRG secured a 91.3% stake in Covestro following an extended acceptance period that ended in December of last year. Adnoc ultimately aims to gain full ownership of the German chemicals company, with the transaction structure enabling a potential squeeze-out of remaining minority shareholders once all regulatory approvals are in place. The acquisition, which secured Covestro management support in November, was due to close in 2H 2025.

The story also got ink in Reuters.

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