Adnoc contests EU findings as €12b Covestro deal faces deeper scrutiny

Dubai: The European Commission launched an in-depth investigation into Abu Dhabi National Oil Company’s (Adnoc) proposed €12 billion (Dh47.8 billion) acquisition of German chemicals firm Covestro.

The probe is part of a newly enforced EU regulation aimed at addressing the competitive impact of foreign state subsidies.

In its official statement, the European Commission said it had “preliminary concerns that foreign subsidies granted by the United Arab Emirates (UAE) could distort the EU internal market.”

Among the subsidies under scrutiny are an “unlimited guarantee” from the UAE government and a potential capital injection from Adnoc into Covestro—both of which may have given Adnoc an edge over any competing bidders.

The Commission argues these benefits might have allowed Adnoc to offer a purchase price and terms that wouldn’t typically be viable for unsubsidised investors, raising fears of unfair competition within the bloc.

In a statement, ADNOC said it “respects the European Commission’s process” but disagrees with the regulator’s initial concerns over its proposed acquisition. The company added it is confident the deal will ultimately be cleared.

“ADNOC has a proven track record in value creation and driving opportunities for growth built on long-term and mutually beneficial partnerships,” the statement said.

”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."

While the deal had earlier passed the EU’s traditional merger control process, the new investigation under the Foreign Subsidies Regulation (FSR) reflects rising European caution toward major acquisitions by state-backed companies from the Gulf and beyond.

If the Commission concludes that the deal breaches the regulation, it could force Adnoc to offer significant concessions—or even block the acquisition entirely. A final decision is expected by December 2, 2025.

This isn’t the first time EU regulators have taken issue with UAE state-linked funding. In 2023, Emirates Telecommunications (e&) had to alter terms of its €2.2 billion deal for PPF Telecom assets by dropping an unlimited state guarantee to receive EU approval.

The EU's Foreign Subsidies Regulation came into force just over a year ago and has since been used mainly to investigate Chinese investments in rail and clean energy sectors.

For UAE-based firms eyeing strategic assets in Europe, the Covestro case could serve as a landmark moment, shaping how future cross-border deals are structured and scrutinised.

Adnoc, as the UAE’s largest oil producer, has been seeking to diversify globally through downstream and specialty chemicals investments, with the Covestro deal seen as a strategic entry into high-performance polymers used in everything from smartphones to electric vehicles.

If approved, the acquisition would hand Adnoc control of Covestro’s operations across Europe and beyond, with over 18,000 employees worldwide and major customers in auto, electronics, and construction sectors.