Adnock International Germany Holding AG And Covestro AG

The judgment

The court's own file

1 COMPETITION TRIBUNAL OF SOUTH AFRICA Case No.: LM140Dec24 In the matter between: ADNOC International Germany Holdings AG Primary Acquiring Firm and Covestro AG Primary Target Firms REASONS FOR DECISION Panel: I. Valodia (Presiding Member) G. Budlender (Tribunal Member) A. Ndoni(Tribunal Member) Heard on: 14 March 2025 Order issued on: 14 March 2025 Reasons issued on: 31 March 2025 Approval 1. On 14 March 2025, the Competition Tribunal (“Tribunal”)unconditionally approved a large merger in which ADNOC International Germany Holding AG (“ADNOC”) intends to acquire 100% of the issued share capital of Covestro AG (“Covestro”). Following the proposed transaction, ADNOC will exercise sole control over Covestro. 2. The primary acquiring firm, ADNOC, is incorporated in Germany and controlled by Abu Dhabi National Oil Company (“ADNOC P.J.S.C”), which is ultimately controlled by the government of the Emirate of Abu Dhabi. In South Africa, ADNOC P.J.S.C controls Trade Ocean Ships Agency (Pty) Ltd, Ocean Gate Holdings (Pty) Ltd, Borealis Chemicals ZA (Pty) Ltd, and Integr8 Fuels South Africa (Pty) Ltd. ADNOC and all entities it controls, as well as any entities that control ADNOC and those they control, are collectively referred to as the "Acquiring Group". The Acquiring Group operates in the energy and petrochemicals sector, covering the entire hydrocarbon value chain through a network of fully integrated businesses. In South Africa, its activities are limited to supplying products such as sulphur, gas oil, gasoline, jet fuel, ammonia and polyolefins, specifically polyethylene (“PE”) and polypropylene (“PP”). 3. The primary target firm, Covestro, is incorporated in Germany and listed on the Frankfurt Stock Exchange. Covestro and the firms it controls will be referred to as the Target Firm. The Target Firm manufactures base chemicals and supplies 2 polyurethane, polycarbonate, and polyester-based chemicals in South Africa through third-party distributors, with no local presence or employees. 4.4.The merging parties contend that their chemicals are distinct due to their differing chemical bases. After assessing the market and consulting competitors of the merging parties, the Commission determined that the merger does not create any horizontal overlaps in South Africa. The Commission found no vertical overlaps in the chemical value chain, as the Acquiring Group's PP and PE chemicals are not essential inputs for the Target Firm's production of polyurethane, polycarbonate, and polyester-based chemicals, and vice versa.Therefore, the Commission concluded that the merger is unlikely to lead to any foreclosure effects in South Africa. 5.5.The transaction will not negatively affect employment in South Africa. The Target Firm has employees based in South Africa, who are employed through the South African branch of Covestro (Slovakia) Services s.r.o,whilst the Acquiring Group has limited employees in its South African subsidiariesand the merger parties submit that they do not have operational control over these entities. 6.6.The Commission noted that the merger does not promote a greater spread of ownership, as neither the Acquiring Group nor the Target Firm has HDP ownership. The merging parties argued that the Competition Act89 of 1998does not impose such an obligation, and the Target Firm has no subsidiaries, employees, or structural changes in South Africa. They submit that the transaction will positively impact public interest by strengthening chemical product activities worldwide, including in South Africa. Citing casessuch as ADNOC PJSC and Navig8 Topco Holdings Inc 1 , ADNOC PJSC and OMV Aktiengesellschaft 2 and Bunge Global SA Ltd andViterra Ltd 3 , where no conditions were imposed due to limited presence in South Africa, the Commission concluded that no further interventions wererequired. NoNofurther issues arose from this. 7.7.We are satisfied that the proposed merger is unlikelyto lead to a substantial preventionor lessening ofcompetition in any relevant market and the proposed merger does not raise any public interest concerns. 8.8.In the circumstances, we unconditionally approve the proposed merger. 3131March 2025 Presiding Member Prof. Imraan Valodia Date Concurring: GeGeoff Budlender SCand MsAndiswa Ndoni Tribunal Case Manager: For the Merging Parties: For the Commission: Moleboheng Mhlati Xolani Nyali, Sivuyise Lutshitiand Lital AviviofofBowmans Makati SeekaneandWiri Gumbie 1 Abu Dhabi Marine Business and Services Company PJSC and Navig8 Topco Holdings Inc. Case No LM085Aug24 2 Abu Dhabi National Oil Company (ADNOC) P.J.S.C And OMV AktiengesellschaftCase NoNo.LM030Jun23 3 Bunge Global SA Ltd And Viterra Ltd Case No.LM139Dec23 Signed by:Imraan Valodia Signed at:2025-04-23 12:42:26 +02:00 Reason:Witnessing Imraan Valodia