Energy Policy & Regulation

The European Commission has initiated a comprehensive investigation into Abu Dhabi National Oil Company’s (Adnoc) proposed €14.7 billion ($16.4 billion) acquisition of German chemical manufacturer Covestro. The investigation is based on concerns that foreign financial support—particularly from the United Arab Emirates—may have influenced the transaction in a way that distorts fair competition within the European Union’s internal market.

Adnoc, a state-owned energy company based in the UAE, acquired 91.3 percent of Covestro’s shares in December 2024 via its investment arm XRG, formerly known as Adnoc International. Although the share acquisition was completed, the overall deal is still awaiting final regulatory approval from European authorities before it can be officially closed.

According to a statement released by the European Commission on Monday, preliminary findings suggest that both Adnoc and Covestro may have received foreign subsidies. These include an “unlimited guarantee” from the UAE government and a “committed capital increase” by Adnoc into Covestro. The Commission believes such financial support may have enabled Adnoc to offer terms for the acquisition that do not align with standard market conditions, potentially giving it an unfair edge over competitors that operate without government subsidies.

The investigation will determine whether these foreign subsidies distorted the acquisition process and whether they could lead to harmful effects on competition within the EU after the merger is finalized. The probe falls under the EU’s foreign subsidies regulation, which came into effect in July 2023. This regulation is designed to ensure fair competition by creating equal market conditions for all firms, regardless of whether they receive state support from outside the EU. A final decision is expected by December 2.