ADNOC Poised To Alter Covestro Deal Amid EU Subsidy Scrutiny - Arabian Post

(MENAFN- The Arabian Post) Arabian Post Staff -Dubai

European regulators are finalising a set of remedies with Abu Dhabi-based oil major ADNOC for its €14.7 billion bid to acquire chemical manufacturer Covestro, adjustments that aim to satisfy concerns under the EU's Foreign Subsidies Regulation.

ADNOC is expected to convert a planned €1.2 billion capital increase into a shareholder loan bearing market terms. The move seeks to counter claims by the European Commission that the proposed capital equity injection could constitute unfair foreign aid under EU rules. In addition, ADNOC will likely address issues around an alleged unlimited state guarantee and commit to keeping Covestro's intellectual property and technology within Europe.

The EU launched its formal investigation in July to assess whether UAE-based government support might distort competition in the internal market. Scrutiny has focused on whether ADNOC's offer price, bolstered by state subsidies such as guarantees and capital injections, created an unlevel playing field. A regulatory deadline of 2 December looms for the European Commission's final decision.

ADNOC has expressed frustration with the breadth of information requests from the Commission, describing them as“disproportionate and invasive.” The company warned that such demands could threaten the viability of its acquisition bid if not managed carefully.

Negotiations involve high level officials: ADNOC CEO Sultan Ahmed Al Jaber spoke with EU antitrust chief Teresa Ribera about the remedy proposals. ADNOC will likely mirror similar steps taken by UAE telecoms group e&, which recently prevailed in an EU review by eliminating an unrestricted state guarantee and following domestic bankruptcy statutes more closely.

Covestro, which produces materials used in insulation, automotive parts and consumer goods, would be one of the biggest acquisitions of an EU firm by a Gulf state if the deal proceeds. The transaction, announced in October, has drawn close attention for being ADNOC's largest ever and for raising questions about foreign capital's role in European markets.

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