EU Investigates UAE’s $17 Billion Bid for German Chemical Firm Over Subsidy Concerns

The European Commission has initiated a full-scale investigation into Abu Dhabi National Oil Company's (ADNOC) proposed acquisition of German chemical manufacturer Covestro, raising concerns about the potential market impact of foreign subsidies,per Reuters.

The deal, valued at £14.7 billion ($17.2 billion), represents ADNOC's largest acquisition to date and marks one of the most significant takeovers of a European firm by a Gulf-based entity.ADNOC struck the agreement last October, aiming to expand its footprint in the global chemicals industry.

However, EU regulators on Monday deepened their scrutiny of the transaction,citing worries that support from the United Arab Emirates government-including an unlimited guarantee and capital commitments from ADNOC- could create distortions in the bloc's internal market. according to Reuters.

The European Commission,which enforces antitrust laws across the 27-member bloc,noted that such financial backing might have given ADNOC an unfair advantage. It suggested that the unusually high offer and favorable terms provided by the Emirati firm may have discouraged competing bids.

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The probe, carried out under the EU's Foreign Subsidies Regulation (FSR), will assess whether the financial aid ADNOC received from the UAE government could affect competition within the EU once the merger is completed.

Responding to the Commission's preliminary findings, ADNOC said it "disagreed" with the assessment and maintained that the acquisition would benefit European stakeholders and stimulate the regional industry. Covestro and ADNOC's investment arm, XRG, stated they remain engaged in “constructive discussions" with regulators and are working cooperatively through the review process.

The Commission has set December 2 as the deadline to deliver its final decision on the matter.

The EU's FSR framework, which took effect recently, is aimed at ensuring that companies receiving significant non-EU state aid do not gain an unfair edge in acquisitions or public procurement within the bloc. Per Reuters, a precedent was set last year when UAE telecom operator e& (formerly Etisalat) gained EU clearance for a Czech acquisition after agreeing to remove state guarantees and prevent the use of foreign subsidies in its EU operations.