ADNOC-Covetsro Deal Face EU’s Anti Subsidies Probe

The European Commission on Monday said that it has opened an in-depth investigation to assess, under the Foreign Subsidies Regulation (FSR), the acquisition by Abu Dhabi National Oil Company PJSC (ADNOC) of Covestro.

The Commission has preliminary concerns that foreign subsidies granted by the UAE could distort the EU internal market. It has time until 2 December 2025 to clear, block or impose remedies on the takeover.

While ADNOC is a State-owned oil and gas producer based in the UAE. Covestro is a chemicals producer based in Germany.

It may be recalled that 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.

EC’s Preliminary Concerns

The preliminary investigation conducted by the European Commission indicated that ADNOC and Covestro might receive foreign subsidies distorting the EU internal market. The possible foreign subsidies notably include an unlimited guarantee from the UAE, as well as a committed capital increase by ADNOC into Covestro.

The Commission has expressed preliminary concerns that the foreign subsidies may have enabled ADNOC to acquire Covestro at a valuation and financial terms that would not be in line with market conditions, and which could not have been matched by unsubsidised investors.

The Commission also has preliminary concerns that the transaction could allow ADNOC to adopt investment strategies that would impact competitive conditions in the internal market.

During its in-depth investigation, the Commission will assess in particular, whether the foreign subsidies that ADNOC may have received distorted the outcome of the acquisition process.

ADNOC may have offered an unusually high price and other favourable conditions, which may have deterred other investors from making an offer; whether such potential foreign subsidies may lead to negative effects in the internal market with respect to the merged entity’s activities after the transaction.

The transaction was notified to the Commission on 15 May 2025 and it now has 90 working days, until 2 December 2025, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

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 second half of 2025.