EU probes UAE oil giant's purchase of Germany's Covestro

AFP | Brussels

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The European Commission yesterday announced an investigation into the takeover of German chemical firm Covestro by UAE state oil giant ADNOC, citing competition fears.

"The commission has preliminary concerns that foreign subsidies granted by the United Arab Emirates could distort the EU internal market," a statement by the bloc's executive arm said. Plastics maker Covestro accepted a bid -- valuing the company at 12 billion euros ($14 billion) -- from the Abu Dhabi National Oil Company in October.

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.

Brussels said it was investigating to see if subsidies from the UAE had allowed ADNOC to outbid competitors for the firm and would help it pump investments into Covestro that would skew the market.

The commission said it would wrap up its probe and take a decision on any potential next steps by December 2.

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.

Challenges facing Germany's energy-intensive chemicals industry show no signs of abating.

Weak demand and high energy costs in the wake of the 2022 Russian invasion of Ukraine have weighed on producers and led them to cut back on production in Germany.

Covestro, which makes chemicals used in everything from building insulation to electric vehicles, had unveiled a savings plan ahead of the takeover announcement last year.