Investigation Divulged: Subsidies in the Emirates under Scrutiny for Adnoc's Acquisition of Covestro by EU Authorities - Investigation Launched by EU over Covestro Acquisition by ADNOC Regarding Subsidies in the United Arab Emirates
The European Commission has opened an in-depth investigation under the Foreign Subsidies Regulation (FSR) into the acquisition of German chemical company Covestro by Abu Dhabi’s state-controlled Abu Dhabi National Oil Company (Adnoc). The Commission has preliminary concerns that subsidies from the UAE, such as an unlimited guarantee and a committed capital increase, may have distorted the EU internal market.
The deal, valued at roughly €12 billion ($14.1 billion), was initially cleared by the Commission on 13 May 2025 without competition concerns. The transaction notification was submitted on 15 May 2025 under the FSR. The Commission started the in-depth probe following preliminary findings suggesting distortions caused by potential foreign subsidies.
The in-depth investigation timeline is set to conclude by 2 December 2025, after which the Commission may approve the deal, impose remedies, or prohibit it if the subsidies are found to distort competition significantly.
If the Commission finds that foreign subsidies under the deal distort the internal market, it could impose remedies or block the acquisition. The case highlights the strengthening EU scrutiny of foreign state-backed investments, especially in strategic sectors such as chemicals. The outcome may set precedents for how the EU regulates foreign subsidies in large acquisitions, ensuring a level playing field.
Adnoc’s subsidiary XRG and Covestro are cooperating with the Commission and engaged in discussions to resolve the issues raised. This investigation exemplifies increased regulatory vigilance under the EU’s recent FSR framework aimed at detecting and remedying distortive foreign subsidies in EU markets. The final decision by December 2025 will be closely watched by multinational investors and regulatory experts.
Covestro, one of the world's leading plastics producers, operates at 48 sites worldwide and employs around 17,500 people. The business fields of Adnoc and Covestro had no significant overlaps, according to the European Commission.
It is important to note that the investigation by the European Commission does not mean that the acquisition is automatically assumed to be in breach of EU rules. The European Commission stated that there were no cause for competition concerns regarding the acquisition.
The acquisition of Covestro by Adnoc was expected to be completed this year. However, the outcome of the investigation by the European Commission is pending. Adnoc announced in December that it already held more than 91 percent of all Covestro shares.
[1] European Commission (2025). Press release: Commission opens in-depth investigation under the Foreign Subsidies Regulation into the acquisition of Covestro by Adnoc. [online] Available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_25_1234
[2] Reuters (2025). EU opens probe into Abu Dhabi's Adnoc's takeover of German chemical company Covestro. [online] Available at: https://www.reuters.com/business/eu-opens-probe-abu-dhabis-adnocs-takeover-german-chemical-company-covestro-2025-05-15/
[3] Financial Times (2025). EU opens in-depth probe into Abu Dhabi's Adnoc's takeover of Covestro. [online] Available at: https://www.ft.com/content/88723af4-7510-408c-a7b1-6d0e6866f1a0
[4] Adnoc (2025). Adnoc announces acquisition of majority stake in Covestro. [online] Available at: https://www.adnoc.ae/en/newsroom/press-releases/adnoc-announces-acquisition-of-majority-stake-in-covestro
[5] EU Commission (2025). Factsheet: The Foreign Subsidies Regulation. [online] Available at: https://ec.europa.eu/info/business-economy-euro/single-market/competition/mergers/foreign-subsidies-regulation_en
- The European Commission's in-depth investigation into the acquisition of Covestro by Abu Dhabi's state-controlled Abu Dhabi National Oil Company (Adnoc) could set precedents for how the EU regulates foreign subsidies in large acquisitions, as the outcome may ensure a level playing field in employment policy across EC countries, particularly in strategic sectors like the finance, energy, and industry.
- The EU's investigation into the deal between Adnoc and Covestro, a leading plastics producer with approximately 17,500 employees worldwide, exemplifies increased regulatory vigilance under the EU's recent Foreign Subsidies Regulation framework aimed at maintaining fair employment practices and preventing distortions caused by foreign subsidies in EU markets.
