Abu Dhabi National Oil Co.’s nearly €12 billion ($14.1 billion) takeover of Covestro AG is edging closer to European Union approval after talks with regulators paved the way for a package of commitments to be submitted as soon as next week, according to people familiar with the matter.
EU watchdogs had earlier been pressing Adnoc for long-term expenditure plans as part of a far-reaching investigation into its planned buyout of German plastics giant Covestro, but Abu Dhabi’s state oil company resisted, considering the information to be a state secret.
Officials are now open to forgoing the information on Adnoc’s future investments in Europe — allowing talks to move forward and setting the stage for formal remedies to be filed next week, said the people, who spoke on condition of anonymity.
The people added that while timing could slip, the plans are, for now, on track for the filing of commitments, 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. Additional concessions were also expected to be put on table, the people said.
Covestro’s shares jumped as much as 6.2% on the news.
A takeover 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 November as the company’s international platform for natural gas, chemicals and energy solutions.
“While we don’t comment on ongoing discussions, we are working constructively with the European Commission,” said a spokesperson for XRG. Covestro and the commission declined to comment.
Other Deals
The progress in talks marks a shift after XRG said earlier this month that the Covestro deals risked being torpedoed by the European competition probe as the requests for information were “disproportionate and invasive.”
A successful closing of the transaction would be key for Adnoc’s and XRG’s ambitions, including plans to use the billions of dollars at its disposal to snap up assets around the world. The company has already done deals for gas assets in the US, Africa and Central Asia, and is planning more in the Americas.
But the boldest play yet, a $19 billion takeover bid for Australian gas producer Santos Ltd., collapsed this month when XRG pulled out of negotiations over a combination of issues that it said hurt the deal’s attractiveness. That puts the focus on the company to show it can close out complex cross-border acquisitions.
In July, the European Commission opened a full-scale investigation into the Covestro deal under tough new foreign subsidies rules, aimed at preventing sovereign states from using their financial muscle to crush competition in the 27-nation bloc. Officials at the EU’s executive arm warned that Adnoc’s state funding may give it an unfair advantage over rivals with less-deep pockets.
Last year under the bloc’s foreign subsidy rules, Abu Dhabi’s Emirates Telecommunications Group Co PJSC was forced to sign up to commitments that removed an unlimited state guarantee, in order to win EU approval for its €2.2 billion acquisition of PPF Telecom Group assets.
Aside from acquisitions, the EU has wielded its foreign subsidy powers largely against Chinese involvement in European markets across rail and clean energy sectors. Regulators raided the premises of Nuctech — a Chinese security equipment company with sites in the Netherlands and Poland.
The progress in talks marks a shift after XRG said earlier this month that the Covestro deals risked being torpedoed by the European competition probe as the requests for information were “disproportionate and invasive.”
A successful closing of the transaction would be key for Adnoc’s and XRG’s ambitions, including plans to use the billions of dollars at its disposal to snap up assets around the world. The company has already done deals for gas assets in the US, Africa and Central Asia, and is planning more in the Americas.
But the boldest play yet, a $19 billion takeover bid for Australian gas producer Santos Ltd., collapsed this month when XRG pulled out of negotiations over a combination of issues that it said hurt the deal’s attractiveness. That puts the focus on the company to show it can close out complex cross-border acquisitions.
In July, the European Commission opened a full-scale investigation into the Covestro deal under tough new foreign subsidies rules, aimed at preventing sovereign states from using their financial muscle to crush competition in the 27-nation bloc. Officials at the EU’s executive arm warned that Adnoc’s state funding may give it an unfair advantage over rivals with less-deep pockets.
Last year under the bloc’s foreign subsidy rules, Abu Dhabi’s Emirates Telecommunications Group Co PJSC was forced to sign up to commitments that removed an unlimited state guarantee, in order to win EU approval for its €2.2 billion acquisition of PPF Telecom Group assets.
Aside from acquisitions, the EU has wielded its foreign subsidy powers largely against Chinese involvement in European markets across rail and clean energy sectors. Regulators raided the premises of Nuctech — a Chinese security equipment company with sites in the Netherlands and Poland.
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