European Commission adopts second in-depth FSR decision in ADNOC/Covestro €15 billion transaction
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Compass Lexecon advised Abu Dhabi National Oil Company’s (‘ADNOC’) on its acquisition of German chemicals manufacturer Covestro, with proceedings by the European Commission under the Foreign Subsidies Regulation (‘FSR’) regime. The European Commission conditionally approved the transaction in November 2025. This was the second-ever merger that went through an in-depth review under the FSR.
Situation
ADNOC, headquartered in the United Arab Emirates (‘UAE'), is a State-owned oil and gas producer and the national oil company of Abu Dhabi. In October 2024, it announced its intention to acquire all outstanding shares of Covestro, a German manufacturer of polymer materials. Compass Lexecon was retained by ADNOC’s external legal counsel, Freshfields, to assist with the FSR filings.
Our role
A team from Compass Lexecon assisted ADNOC and its counsel with the evaluation of the economic terms of the loans utilized by ADNOC to finance its operations and acquisition of Covestro. We also analysed from an economic perspective the merits of commitments for licensing of sustainability patents.
Outcome
The European Commission considered that the foreign subsidies that ADNOC received from the UAE, and in particular the unlimited State guarantee, may have enabled ADNOC to bid for Covestro under financial terms not aligned with market conditions, and can improve the combined entity's competitive position post-concentration, likely to leading to a distortion of competition in the EU internal market. ADNOC then proposed remedies which were sufficient to overcome the Commission’s concerns and balance out the negative effects of the transaction on the internal market, one of them being a novel IP-licensing remedy designed to benefit the broader chemical industry's sustainability efforts.In November 2025, following a Phase II review, the Commission conditionally cleared the transaction under the FSR regime. It had previously already approved the deal under the merger regulation. This marks only the second-ever in-depth FSR investigation, following the Commission’s earlier conditional approval in e&/PPF Telecom from September 2024.
The team
The Compass Lexecon team, led by Lorenzo Coppi and Alan Rozenberg, included Marcin Pruski and India Riordan.
They advised ADNOC’s external legal counsel from Freshfields, including Thomas Janssens, Rafique Bachour, Tuna Tanik, Clementine Vande Maele, Ioana-Virginia Motoc, Justyna Smela Wolski, and Kryštof Žáček.