Adnoc’s €12 Billion Covestro Deal Poised to Win EU Approval

(Bloomberg) -- Abu Dhabi National Oil Co. is poised to win conditional European Union approval for its €12 billion ($13.8 billion) takeover of Covestro AG after it allayed competition concerns over the deal.

The European Commission is preparing to give the go-ahead in the next few weeks, according to people familiar with the matter, who spoke on condition of anonymity. They added that the decision, which follows a package of antitrust commitments from Adnoc, is currently in draft form and the timing could change. 

The planned purchase of Covestro would give Adnoc — the biggest oil producer in the United Arab Emirates — control over a German company that supplies materials for some of the world’s most prominent phone and carmakers. Adnoc would own Covestro through its investment unit XRG, set up in last year as the company’s international platform for natural gas, chemicals and energy solutions.

XRG and Leverkusen-based Covestro both declined to comment beyond stating that they are continuing to engage in constructive talks with the commission. The commission in Brussels declined to comment. Covestro shares rose 0.7% as its peers declined.

In July, the commission, the EU’s antitrust arm, opened a full-scale investigation into the Covestro deal under tough new foreign subsidies rules. These are aimed at preventing sovereign states from using their financial muscle to crush competition in the 27-nation bloc. EU officials warned at the time that Adnoc’s state funding may give it an unfair advantage over rivals with less-deep pockets.

Since then, Adnoc offered concessions including a pledge to maintain Covestro’s intellectual property in Europe as well as concessions on the company’s unlimited state guarantee from the UAE, Bloomberg previously reported. 

Customers and rivals gave no major pushback to the proposed remedies during a so-called market test, the people said.

(Updates with shares, comment in fourth paragraph.)

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