The European Commission has opened an in-depth investigation into the proposed acquisition of German chemical producer Covestro by the Abu Dhabi National Oil Company (ADNOC), citing concerns that subsidies granted by the United Arab Emirates could distort competition in the EU’s internal market.
The investigation, launched under the Foreign Subsidies Regulation (FSR), follows a preliminary review suggesting that ADNOC may have benefited from substantial foreign financial support, including an unlimited state guarantee and a planned capital increase into Covestro. Regulators fear these measures may have enabled ADNOC to offer a purchase price and financial terms that other, unsubsidised investors would have been unable to match, potentially deterring rival bidders.
The Commission is also examining whether such subsidies could give ADNOC and Covestro a competitive edge after the merger, allowing them to pursue investment strategies that undermine fair competition in the EU.
The transaction was formally notified to the Commission on May 15, 2025. Officials now have until December 2, 2025, to reach a decision. Possible outcomes include unconditional clearance, approval subject to remedies proposed by ADNOC, or prohibition of the deal. The Commission underlined that opening an in-depth probe does not prejudge the final outcome.
ADNOC, headquartered in Abu Dhabi, is the state-owned oil and gas company of the UAE. Covestro, formerly part of Bayer, is a German-based producer of high-performance polymers serving a wide range of industries and employing around 18,000 people.
The Foreign Subsidies Regulation, which entered into force in July 2023, gives the Commission new powers to examine and address distortions caused by subsidies granted by non-EU governments. Under the rules, companies must notify transactions if one party generates at least €500 million in EU turnover and if the firms involved received at least €50 million in combined foreign financial contributions in the three years prior to the deal.
