European Commission Conditionally Approves ADNOC's Acquisition of Covestro

November 14, 2025 — The European Commission has approved the acquisition of Covestro by the Abu Dhabi National Oil Company (ADNOC) under the Foreign Subsidies Regulation (FSR). This approval is conditional upon the parties' full compliance with the commitments they have offered.

This decision follows an in-depth investigation launched by the Commission into the proposed acquisition.

ADNOC, headquartered in the United Arab Emirates (UAE), is a state-owned oil and gas producer and the national oil company of Abu Dhabi.

Covestro, a stock-listed company registered in Germany, is one of the world's leading manufacturers of high-quality polymers and their components. As of the end of 2024, Covestro operated 46 production sites worldwide with approximately 17,500 employees (full-time equivalent).

Findings of the Commission's Investigation

During its in-depth investigation, the Commission gathered further information from the parties and obtained feedback from their competitors. It found that:

· ADNOC and Covestro had received foreign subsidies from the UAE that could distort the EU internal market.
· The foreign subsidies obtained included an unlimited state guarantee provided by the UAE government to ADNOC, a capital increase committed by ADNOC to Covestro, and certain preferential tax measures.
· The identified foreign subsidies were likely to negatively affect competition during the acquisition process. In this regard, the Commission specifically considered the exceptionally favourable conditions offered by ADNOC to acquire Covestro, including the capital increase, which may have deterred other investors from making takeover offers.
· The identified foreign subsidies were also likely to cause competition distortions after the transaction, when the merged entity operates in the internal market. Under the FSR, an unlimited state guarantee is considered "highly likely to distort the internal market" and could thus distort the merged entity's activities within it.

Overall, the identified foreign subsidies artificially enhanced the merged entity's financing capacity for its activities in the EU internal market and increased its risk tolerance. Consequently, compared to a situation without these subsidies, the merged entity could adopt more aggressive investment strategies, harming competition and other market participants in the internal market.

Proposed Remedies

To address the Commission's competition concerns, ADNOC offered to:

· Amend its statutes to ensure it does not deviate from the provisions of the UAE's ordinary insolvency law, thereby removing the unlimited state guarantee.
· Share Covestro's patents in the field of sustainability with certain market participants based on pre-defined, transparent terms and conditions. This commitment would benefit competitors that are particularly reliant on Covestro's sustainability technologies.

The Commission considers that these commitments will remove the advantage of the unlimited state guarantee enjoyed by ADNOC. Furthermore, the benefits for market operators from accessing Covestro's sustainability patents will offset the negative effects of the transaction on the internal market.

These commitments are valid for 10 years. The commitment related to Covestro's patents will continue to apply for the entire duration of any licensing agreements concluded during that commitment period.

Considering the positive feedback received during the market test, the Commission concluded that the offered commitments effectively address the identified concerns, particularly thanks to their potential spill-over effects for the entire chemical industry, specifically innovation in its sustainability segment. Therefore, the transaction, as modified by the commitments, would no longer raise competition concerns.

The Commission's decision to approve the transaction is conditional upon the parties' full compliance with these commitments. An independent trustee, under the Commission's supervision, will be responsible for monitoring their implementation.