EU scrutinizes ADNOC's $17.2 billion Covestro deal due to potential subsidies involvement
The European Commission has launched an in-depth investigation under the EU’s Foreign Subsidies Regulation (FSR) into the planned acquisition of German chemical company Covestro by Abu Dhabi National Oil Company (ADNOC). The investigation, which began in June 2025, is focused on potential distortions to competition in the EU internal market arising from subsidies granted by the UAE to ADNOC, such as an unlimited state guarantee and a committed capital increase for the acquisition.
The €12-14 billion transaction, initiated in October 2024, represents one of the largest foreign takeovers of an EU company by a Gulf state. Despite preliminary approval by the Commission in May 2025, the new investigation was opened after a preliminary review raised concerns. The Commission aims to reach a decision by December 2, 2025, with possible outcomes including clearance, conditional commitments, or prohibiting the deal if distortions persist.
ADNOC and Covestro have cooperated with the investigation and remain confident the transaction will close within 2025, although Covestro’s recent earnings were impacted by other market factors like U.S. tariffs. ADNOC, however, has expressed disagreement with the Commission's preliminary findings regarding the Covestro deal.
The EU’s Foreign Subsidies Regulation (FSR) focuses on preventing unfair foreign aid for companies to control unfair competition. This case reflects the EU’s increasingly stringent approach to foreign takeover scrutiny, especially concerning state-backed investments that may affect the bloc’s internal market competition. The investigation highlights the EU’s intent to prevent foreign subsidies from distorting competition and investment patterns within the EU chemical sector and beyond.
The Commission is also looking into possible negative effects in the internal market resulting from the merged company's activities. The deal, if approved, would mark ADNOC's biggest ever acquisition and is one of the largest foreign takeovers of an EU company by a Gulf state. The Commission has set a December 2 deadline for its decision on the Covestro deal under the FSR.
- The investigation under the EU's Foreign Subsidies Regulation (FSR) into ADNOC's acquisition of Covestro delves into potential distortions in the EU internal market, particularly from subsidies in the finance sector and energy industry.
- The EU chemical sector and other related industries may be influenced by foreign subsidies, as evidenced by the investigation into ADNOC's acquisition of Covestro, a case that underscores the EU's aim to maintain fair business competition.
