Adnoc Criticizes European Union (EU) for Halting Review, Raising Doubts Over Covestro Acquisition, Causing Stock Price to Plummet

According to a report from Zhuan Su Shi Jie on September 5, the Abu Dhabi National Oil Company (Adnoc strongly criticized the EU competition regulators for pausing their review of its €14.7 billion acquisition of German chemical giant Covestro.Called this move "unreasonable and an invasion of privacy"...and warned that the decision could jeopardize the largest overseas acquisition in the history of Middle Eastern business. Hit by regulatory uncertainties, Covestro's share price plunged more than 11% intraday on September 4 (European time), eventually closing down 7%, marking the biggest single-day drop since the acquisition agreement was signed in October 2024.

EU suspension of review triggers regulatory storm

European Commission onOn September 3, it was announced that due to Adnoc's failure to submit critical information as required, the subsidy investigation into this acquisition has been suspended. According to the Foreign Subsidies Regulation (FSR), if a company does not provide complete information within the statutory deadline, the regulatory authority has the right to halt the review. An EU spokesperson emphasized that the investigation focuses on whether the UAE government has provided Adnoc with an unfair competitive advantage through "unlimited guarantees," "capital injections," and other means, which could distort competition in the EU chemical market.

However,Adnoc, through its international investment arm XRG, has hit back, stating that the EU’s demands “go far beyond the reasonable scope of the transaction and extend into excessive and intrusive areas.” The company’s statement bluntly pointed out: “If such practices continue, the viability of this investment will be seriously called into question.” Although Adnoc expressed its continued commitment to seeking a “constructive solution,” its tough stance highlights that the conflict between the two sides has become increasingly difficult to resolve.

From stop-loss price dip to technical rebound

Regulatory deadlock directly impacts market confidence. Covestro's stock price inOn the morning of September 4th, the price briefly fell below 54 euros, triggering the stop-loss line set by the German financial media "Aktionär." Subsequently, driven by bottom-fishing funds, it rebounded to close at 55 euros. This fluctuation reflects investors' deep anxiety about the trading outlook—if the acquisition fails, Covestro will lose the 1.2 billion euros strategic investment promised by Adnoc, potentially setting back its plans to transform into high-end materials. If the acquisition succeeds, Covestro will have to face the strict conditions that the EU might impose, such as divesting some businesses or restricting the use of government subsidies.

"The market is pricing in the worst-case scenario," analysts at Germany's Bernstein Research noted. "Even if the deal is ultimately approved, the delay itself has caused Covestro to miss the window for consolidation in the chemical industry, and its valuation logic will be restructured."

ADNOC's "Post-Oil" Ambitions and the EU's Industrial Protection

Zhuan Su Shijie believes that behind this conflict isAdnoc accelerates the layout of high-end chemicals and the dual logic of maintaining industrial sovereignty with the EU.

Adnoc's Transformation Anxiety: As a state-owned oil giant in the UAE, Adnoc is extending its industrial chain into specialty chemicals such as polyurethanes and polycarbonates through the acquisition of Covestro. If the deal goes through, its PC capacity will reach 1.59 million tons per year and MDI capacity will reach 1.77 million tons per year, approaching European giants like BASF and Dow. In addition, Covestro's low-carbon material technologies (such as bio-based polyesters and recyclable plastics) are highly aligned with Adnoc's strategies for "blue ammonia" and "low-carbon diesel," which can help it circumvent carbon border adjustment mechanism (CBAM) barriers.

The EU's balancing act: In the face of the energy crisis and the pressure of chemical companies relocating, the EU needs to attract foreign investment to stabilize the supply chain while preventing subsidies from non-EU countries from distorting competition.The Foreign Subsidies Regulation, which came into effect in 2023, has triggered multiple cross-border merger investigations. However, the investigation targeting Adnoc is particularly sensitive as it involves Middle Eastern sovereign funds. Analysts believe that the EU might take the opportunity to require Adnoc to commit to increasing R&D investment in Europe or to limit the scope of government subsidies in exchange for approval of the transaction.

December 2nd is a key milestone.

According to the EU timetable, the investigation will beAfter Adnoc submitted supplementary materials, the review has restarted, but the final decision date has not yet been announced (originally scheduled for December 2). If the EU determines that the transaction violates regulations, it may require modification of the terms (such as divesting certain assets) or directly reject the deal. In response, Adnoc has reserved $150 billion for global investments in oil, gas, and chemicals. If the Covestro deal is blocked, Adnoc may turn to alternative targets such as Canada’s Nova Chemicals or Austria’s OMV. However, it will be difficult to replicate Covestro’s customer network in the automotive and new energy sectors.

If the deal falls through for Covestro, its stock price may further decline toThe range of 45 euros (close to the 2023 low), while the management needs to quickly reassure investors and restart the independent development plan. This regulatory tug-of-war has far exceeded the scope of an ordinary merger and acquisition, becoming a microcosm of the restructuring of the global chemical industry landscape.