EU to probe Covestro takeover, as UAE buying spree continues

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

A statement by the European Union’s executive arm said, “The commission has preliminary concerns that foreign subsidies granted by the United Arab Emirates could distort the EU internal market.”

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 per cent of the country’s GDP, has been gripped by crisis.

WORLDWIDE INVESTMENTS

Meanwhile, Covestro isn’t some freak case, as the UAE has been investing heavily on mergers and acquisitions (M&As), both domestically and globally, as well as FDI in other countries.

For example, the UAE earlier this year promised investing $40 billion in Italy.

Read more: Italy’s Meloni bags UAE investment pledge worth $40 billion

Similarly, US President Donald Trump managed to attract $1.4 trillion Emirati investment in artificial intelligence sector over the next decade.

This amount is in addition to other investment pledges made by the UAE.

Obviously, these massive investments are fortifying the Gulf State’s status as a global player.

Read more: Syria signs $800m port deal with UAE-based company

STATE SUBSIDIES

Meanwhile, the UAE companies have stake in different sectors across Europe – from sports to luxury goods.

Coming back to Covestro, 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.

The Leverkusen-based firm, which was spun off from chemicals giant Bayer in 2015, said it would cut material and personal costs in the hopes of saving some 400 million euros annually.