The European Commission has launched an in-depth investigation into the planned acquisition of Covestro, a German chemicals producer, by Abu Dhabi National Oil Company PJSC (ADNOC), which is owned by the United Arab Emirates. The probe will examine whether foreign subsidies provided by the UAE could distort competition within the European Union’s internal market.
According to the Commission, ADNOC and Covestro may have received foreign subsidies that could impact market dynamics. The investigation will focus on potential support such as an unlimited guarantee from the UAE and a committed capital increase by ADNOC into Covestro. There are concerns that these subsidies might have allowed ADNOC to acquire Covestro at financial terms not aligned with market conditions, potentially disadvantaging unsubsidised investors.
The Commission stated: “The preliminary investigation indicates that ADNOC and Covestro may receive foreign subsidiesdistorting the EU internal market.”
It further outlined its specific concerns: “The possible foreign subsidies notably include an unlimited guarantee from the UAE, as well as a committed capital increase by ADNOC into Covestro. The Commission has preliminary concerns that the foreign subsidies may have enabled ADNOC to acquire Covestro at a valuation and financial terms that would not be in line with market conditions, and which could not have been matched by unsubsidised investors. The Commission also has preliminary concerns that the transaction could allow ADNOC to adopt investment strategies that would impact competitive conditions in the internal market.”
During this process, authorities will assess whether any foreign subsidies distorted the outcome of the acquisition process or could lead to negative effects on competition following completion of the deal. The transaction was formally notified to regulators on 15 May 2025. Under current rules, the Commission has 90 working days—until 2 December 2025—to reach a decision. Officials emphasized: “The opening of an in-depth investigation does not prejudge the outcome of the investigation.”
ADNOC is based in Abu Dhabi and serves as its national oil company. Covestro, formerly known as Bayer MaterialScience AG, is headquartered in Germany and specializes in high-performance polymers for various industries, employing around 18,000 people.
The Foreign Subsidies Regulation (FSR), which came into effect on 12 July 2023, allows EU authorities to address possible distortions caused by foreign state support. Under this regulation, companies must notify mergers or acquisitions if one party is established in the EU with turnover exceeding €500 million and if parties involved received more than €50 million in aggregate financial contributions from non-EU countries over three years before the deal.
At the end of its review period, the Commission can accept remedies proposed by companies if they address any identified distortion, prohibit a merger outright, or issue a no-objection decision.
More information about this case can be found on the Commission’s public case register under case number FS.100156.
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