By Foo Yun Chee
BRUSSELS (Reuters) – Abu Dhabi state oil giant ADNOC is readying remedies to address an EU subsidy investigation into its 14.7 billion euro ($17.2 billion) bid for Germany’s Covestro that will likely see it convert a proposed 1.2 billion euro capital hike to a shareholder loan, people familiar with the matter said.
The deal is ADNOC’s biggest ever acquisition and one of the largest foreign takeovers of an EU company by a Gulf state.
The European Commission, which acts as the EU competition watchdog, has warned that ADNOC may be benefiting from state subsidies such as an unlimited guarantee and that foreign aid could also be involved in the capital increase at Covestro.
ADNOC will likely convert the Covestro capital increase to a shareholder loan at market rates, the people said.
The company also plans to address EU concerns about unlimited state guarantees in the same way UAE telecoms group e& did to secure EU approval for parts of Czech telecoms company PFF last year, the people said.
e& agreed to remove its unlimited state guarantee by ensuring that its articles of association do not deviate from ordinary UAE bankruptcy law.
ADNOC will likely pledge to keep Covestro’s technology and intellectual property in Europe, the people said.
The Commission, which is investigating the deal under its Foreign Subsidies Regulation (FSR) targeting unfair foreign aid for companies, declined to comment.
A spokesperson for XRG, the international investment arm of ADNOC, said it did not comment on ongoing discussions.
ADNOC Chief Executive Sultan Ahmed Al Jaber held a phone call with EU antitrust chief Teresa Ribera on Friday, the people said.
ADNOC last week slammed EU regulators for disproportionate and invasive requests for information that it warned may jeopardise the deal.
(Reporting by Foo Yun Chee; Editing by Kirsten Donovan)
