EC Conditionally Approves ADNOC’s $17-Billion Acquisition of Covestro
The European Commission has approved with conditions the $17-billion acquisition by Abu Dhabi National Oil Company (ADNOC) of Germany’s chemicals giant Covestro, the EU’s executive arm said on Friday, following an investigation into foreign subsidies it feared would distort competition.
At the end of last year, Abu Dhabi’s oil company agreed to buy Covestro in a deal worth $17 billion (14.7 billion euros) including debt. The deal was one of the largest cash transactions in the chemicals industry ever, as well as the first time a company part of the DAX 40 blue-chip index in Germany would be acquired by a state company from the Gulf.
ADNOC, which pumps nearly all the oil in OPEC’s major producer the United Arab Emirates (UAE), looks to buy into chemicals and petrochemicals to diversify its downstream portfolio.
The mega-acquisition, however, ran into EU regulations and investigation, under the EU’s Foreign Subsidies Regulation (FSR), as ADNOC is a state-owned oil and gas producer.
The European Commission, in July, opened an in-depth foreign subsidies investigation into ADNOC’s acquisition of Covestro as its preliminary investigation and concerns indicated that ADNOC and Covestro may receive foreign subsidies distorting the EU internal market.
On Friday, the Commission announced it had approved, under the Foreign Subsidies Regulation, the deal, but the approval “is conditional upon full compliance with the commitments offered by the parties.”
ADNOC has offered remedies to address the Commission’s concerns and these include removing the unlimited state guarantee and share Covestro’s patents in the area of sustainability with certain market participants at transparent terms and conditions set in advance. This commitment will benefit competitors that are particularly reliant on access to Covestro’s sustainability technology.
The Commission found that these commitments effectively address the concerns about the EU market competition.
“The commitments are valid for a period of 10 years. The commitments relating to Covestro’s patents will continue to be in force after the expiry of the commitment period, for the lifetime of any licensing agreement entered under this period,” the Commission said today.
By Charles Kennedy for Oilprice.com