The European Commission is investigating Abu Dhabi National Oil Company (ADNOC)’s acquisition of Covestro amid concerns that foreign subsidies from the UAE could distort the EU’s internal market.
Concerns have arisen as Covestro, a chemicals producer based in Germany, is being acquired by ADNOC, a state-owned oil and gas producer from the UAE. ADNOC now holds 91.3% of all outstanding shares of Covestro, including shares previously acquired.
When the voluntary public takeover offer was announced in December 2024, Covestro CEO Dr. Markus Steilemann commented: “With ADNOC respectively XRG as strong and long-term-oriented partner, we will be able to execute on our ‘Sustainable Future’ strategy even more consistently. As part of the XRG Group and following the closing of the transaction, we will be in a position to further accelerate our ongoing transformation.”
However, a preliminary investigation has suggested that ADNOC and Covestro may be receiving foreign subsidies, including an unlimited guarantee from the UAE and a committed capital increase by ADNOC into Covestro.
The Commission fears that these conditions could have helped ADNOC acquire Covestro at a valuation and financial terms that a) did not align with market conditions, and b) could not have been matched by unsubsidised investors.
It also raises the possibility that ADNOC could adopt investment strategies with negative repercussions on the competitive conditions of Europe’s internal market.
“The background to this is the almost unlimited guarantees with which a state-owned company can act and finance such a takeover - unlike free market players,” explained Christian Schiller, founder and CEO of Cirplus, in a LinkedIn post.
“But beyond the competition law dimension, the EU should critically examine this deal from another, strategically decisive perspective: Only at the beginning of July, the Commission presented its Chemical Industry Action Plan – with the declared goal of strengthening European raw material sovereignty in the chemical industry.
“Against this background, it seems absurd to place one of Europe’s most important plastics companies under the complete control of an authoritarian foreign state.”
Under the Foreign Subsidies Regulation, the Commission is permitted to undertake an investigation over 90 working days, by the end of which it can either accept commitments that ‘fully and effectively remedy’ any market distortion, prevent the concentration, or issue a no-object decision.
In this case, the Commission will assess whether ADNOC distorted the outcome of the acquisition process by offering an ‘unusually high price’ and ‘other favourable conditions’ that dissuaded other investors from making an offer.
It will also examine whether the merged entity’s activities after the transaction will have negative impacts on the internal market.
Since the transaction was notified to the Commission on 15th May 2025, the Commission now has until 2nd December to make a decision.
Schiller hopes that German and European politicians will “put a stop to this sell-out of German and European interests and not to support foreign state-owned companies with German taxpayers’ money.”
The news comes after the Commission commenced an infringement procedure against all 27 EU Member States last summer. This was enforced because every country had fallen short of legally binding collection and recycling targets, such as the 55-80% threshold set out by the Packaging and Packaging Waste Directive for the end of 2008.
The Commission went on to take legal action against several Member States for failing to comply with EU law; this includes France’s violation of the Treaty on the Functioning of the European Union via its nation-specific labelling requirements, for which it has since been referred to the Court of Justice of the European Union.
Elsewhere, the United Nations is investigating accusations that, by replacing its reusable glass bottles with single-use plastic alternatives, Coca-Cola Europacific Partners has worsened plastic pollution in Samoa and violated both environmental laws and human rights standards.
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