The European Commission has launched a thorough investigation regarding the acquisition of Covestro by Abu Dhabi National Oil Company PJSC (ADNOC) under the Foreign Subsidies Regulation (FSR). Initial concerns suggest that foreign subsidies from the United Arab Emirates (UAE) may disrupt the EU internal market.

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

The Commissions preliminary concerns

The preliminary investigation indicates that ADNOC and Covestro may receive foreign subsidies that distort the EU internal market.

The potential foreign subsidies include an unlimited guarantee from the UAE and a committed capital increase by ADNOC into Covestro. The Commission has preliminary concerns that these foreign subsidies may have enabled ADNOC to acquire Covestro under terms that do not align with market conditions, making it difficult for unsubsidized investors to compete. The Commission is also concerned that the transaction could allow ADNOC to implement investment strategies affecting competitive conditions in the internal market.

During its thorough investigation, the Commission will particularly assess:

• Whether the foreign subsidies received by ADNOC distorted the acquisition process. ADNOC may have offered an unusually high price and favorable conditions, deterring other investors from participating.
• Whether these potential foreign subsidies may lead to negative effects in the internal market regarding the merged entitys activities post-transaction.

The transaction was notified to the Commission on May 15, 2025. The Commission has 90 working days until December 2, 2025 to make a decision. Opening an in-depth investigation does not determine the outcome of the inquiry.

Companies

ADNOC, headquartered in the UAE, is a State-owned oil and gas producer, the national oil company of Abu Dhabi.

Covestro (formerly Bayer MaterialScience AG), a publicly listed company incorporated in Germany, specializes in high-performance polymers and components for various sectors, employing around 18,000 people.

The procedure under the Foreign Subsidies Regulation

The FSR took effect on July 12, 2023. This Regulation allows the Commission to address distortions caused by foreign subsidies, ensuring a level playing field for all companies in the internal market while remaining open to trade and investment.

According to the FSR, companies must notify concentrations to the Commission when at least one of the merging companies, the acquired company, or the joint venture is established in the EU and generates an EU turnover of at least €500 million, and when the parties received at least €50 million in combined foreign financial contributions from third countries in the three years before the concentration.

By the end of its 90-working day investigation, the Commission may (i) accept commitments proposed by the company if they adequately remedy the distortion, (ii) prohibit the concentration, or (iii) issue a no-objection decision.

Further information will be available on the Commissions competition website, in the Commissions public case register under case number FS.100156.