ADNOC's Covestro buy may be boosted by foreign subsidies, EU warns
ADNOC struck the deal to buy Covestro last October, marking its biggest ever acquisition and one of the largest foreign takeovers of an EU company by a Gulf state.
The European Commission, which has been reviewing the deal under its foreign subsidies rules since May, opened an in-depth investigation on Monday, warning that foreign subsidies granted by the United Arab Emirates could distort the EU internal market.
The Commission, which acts as the EU competition enforcer, said the possible foreign subsidies include an unlimited guarantee from the UAE, as well as a committed capital increase by ADNOC into Covestro.
"ADNOC may have offered an unusually high price and other favourable conditions, which may have deterred other investors from making an offer," it said in a statement.
The EU investigation will also look into possible negative effects in the internal market resulting from the merged company's activities once the deal is concluded.
The Commission set a December 2 deadline for its decision on the deal.
Both companies did not immediately respond to requests for comment.
The EU's Foreign Subsidies Regulation (FSR) focuses on unfair foreign aid for companies in a bid to rein in unfair competition from non-EU companies subsidised by their governments.
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