Adnoc Contests European Commission Probe Into Covestro Takeover Bid

Adnoc has contested the European Commission's investigation into its takeover bid for German chemical firm Covestro, saying that the transaction will add value for all stakeholders.

The European Commission on Monday opened an in-depth investigation to assess, under the Foreign Subsidies Regulation ('FSR'), the acquisition by Adnoc of Covestro.“The Commission has preliminary concerns that foreign subsidies granted by the UAE could distort the EU internal market,” the Commission said in a statement.

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 said.“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 statement added.

A spokesperson for Adnoc said:“Adnoc has a proven track record in value creation and driving opportunities for growth built on long-term and mutually beneficial partnerships. While we respect the European Commission's process, we contest the preliminary findings of the Commission and are confident that when the facts are fully examined, there will be no reason to hold up clearance of a transaction that will add great value for all stakeholders and stimulate European industry.”

According to the FSR, companies must notify concentrations to the Commission when at least one of the merging companies, the acquired company or the joint venture is established in the EU and generates an EU turnover of at least €500 million, and when the parties were granted at least €50 million in combined aggregate foreign financial contributions from third countries in the three years prior to the concentration.

Covestro accepted a bid - valuing the company at €12 billion ($14 billion) - from the Adnoc in October, Reuters reported.

The acquisition came as Germany's key chemicals sector, which makes up around five percent of the country's GDP, has been gripped by crisis. Adnoc promised to inject around 1.2 billion euros into the chemicals firm through the issuance of new shares under the terms of the takeover.

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