ADNOC’s Covestro bid gets greenlight as EU demands end to unlimited UAE backing

Covestro

THE EUROPEAN UNION (EU) has approved Abu Dhabi National Oil Company’s (ADNOC) €14.7bn (US$17.1bn) takeover of German chemicals producer Covestro, but only on the condition that key financial advantages linked to the deal are removed.

Following an investigation under the European Commission’s Foreign Subsidies Regulation (FSR), ADNOC agreed to withdraw an unlimited state guarantee from the United Arab Emirates (UAE) government that formed part of the initial deal agreed last October. The FSR states that unlimited state guarantees are “likely to distort the internal market”.

In addition, ADNOC has agreed to share Covestro’s sustainability patents with “certain market participants” that the EU says are “particularly reliant on access to Covestro’s sustainability technology”.

The EU’s conditions, which also limit a capital increase in Covestro originally proposed by ADNOC, will apply for ten years. However, the requirement to share sustainability patents will remain in force for the full duration of any resulting licensing agreements, even if they extend beyond that ten-year period.

Teresa Ribera, the European Commission’s executive vice-president for clean, just and competitive transition, said: “Clear, pre-defined access to these patents will enable others to innovate and advance research in an area that is critical for Europe’s future.

“We welcome the constructive cooperation shown by both ADNOC and Covestro in reaching this solution.”

ADNOC’s Covestro takeover is just the second deal to be subject to conditions under the FSR out of 203 cases assessed by the EU since the regulations came into force in 2023. It mirrors a similar case in September 2024 when the EU ruled that a company controlled by the UAE sovereign wealth fund could only acquire a Dutch telecoms operator if it withdrew an unlimited state guarantee.

Eyes on EU

The Covestro deal is ADNOC’s biggest acquisition yet and further underscores its ambitions to expand its presence in the European petrochemicals sector. According to Reuters, a planned US$60bn merger between ADNOC and Austrian refiner OMV – in which ADNOC holds a 24.9% stake – would create the world’s fourth-largest polyolefins producer.

Talks between ADNOC and Covestro had been ongoing for more than a year before the takeover was announced, following a recent downturn in profits. Covestro was formed in 2015 following its spin-off from pharmaceuticals giant Bayer and is listed on the Frankfurt Stock Exchange. The company primarily produces polycarbonates, engineering plastics, coatings and adhesives, tailored urethanes, thermoplastic polyurethanes, speciality films and elastomers. In 2022, it ranked as the world’s 21st-largest chemicals company and fourth-largest in Europe.