By Bart H. Meijer
(Reuters) -Abu Dhabi state oil giant ADNOC’s 14.7 billion euro ($17.2 billion) bid for German chemicals company Covestro may face hurdles after antitrust regulators on Monday opened an investigation into compliance with EU foreign subsidies rules.
ADNOC struck the deal to buy Covestro last October, marking its biggest acquisition and one of the largest foreign takeovers of an EU company by a Gulf state.
The European Commission, which has been reviewing the deal under its foreign subsidies rules since May, opened an in-depth investigation on Monday, saying the subsidies granted by the United Arab Emirates could distort the EU internal market.
The Commission, which acts as the EU competition enforcer, said the possible foreign subsidies include an unlimited guarantee from the UAE, as well as a committed capital increase by ADNOC into Covestro.
“ADNOC may have offered an unusually high price and other favourable conditions, which may have deterred other investors from making an offer,” it said in a statement.
The EU investigation will also look into any negative effects in the internal market that would result from the merged company’s activities once the deal is concluded.
A spokesperson for ADNOC said: “ADNOC has a proven track record in value creation and driving opportunities for growth built on long-term and mutually beneficial partnerships.
“While we respect the European Commission’s process, we contest the preliminary findings of the Commission and are confident that when the facts are fully examined, there will be no reason to hold up clearance of a transaction that will add great value for all stakeholders and stimulate European industry,” the spokesperson said.
Covestro in a statement said that, together with XRG, the internal investment arm of ADNOC, it remained “in constructive discussions with the European Commission” and was cooperating to conclude the foreign subsidies review.
The Commission set a December 2 deadline for its decision on the deal.
The EU’s Foreign Subsidies Regulation focuses on unfair foreign aid for companies to try to prevent unfair competition from non-EU companies subsidised by their governments.
UAE telecoms group e& secured EU approval to buy parts of Czech telecoms company PPF last year after it agreed to scrap an unlimited state guarantee and not to channel foreign subsidies into the activities of the merged company in the EU.
($1 = 0.8569 euros)
(Reporting by Bart Meijer in Amsterdam and Yousef Saba in Dubai. Additional reporting by Patricia Weiss in Frankfurt and Bartosz Dabrowski in Gdansk. Writing by Foo Yun Chee. Editing by Louise Heavens, Mark Potter and Barbara Lewis)
