CPChem makes $15-billion bid to buy Nova Chemicals
CPChem has made a $15-billion bid to acquire Nova Chemicals in a deal that would make CPChem the third-largest PE producer in North America behind ExxonMobil and Dow and the largest producer of HDPE in North America, said WoodMac analyst Ashish Chitalia.
Chevron Phillips Chemical Co. LP (CPChem), a joint venture of Chevron Corp. and Phillips 66, has made a $15-billion bid to acquire Nova Chemicals Corp., owned by UAE-based Mubadala.
The deal would make CPChem the third-largest polyethylene producer in North America behind ExxonMobil Chemical Co. and Dow Chemical Co. and the largest producer of high-density polyethylene (HDPE) in North America followed by LyondellBasell, said Ashish Chitalia, Wood Mackenzie chemicals principal analyst, in a press statement.
The companies complement in terms of products (polyethylene, polystyrene), geographic footprint, and technology. The deal also would “confirm the trend of Big Oil diversifying further into downstream, viewing the petrochemical sector as a growth engine,” Chitalia said.
“CPChem is a predominant producer of [HDPE], while Nova Chemicals’ portfolio leans towards linear low-[density] polyethylene (LLDPE),” Chitalia said. CPChem is a major North American producer of polystyrene through its American Styrenics JV—accounting for some 28% of North American polystyrene capacity. Nova Chemicals is a major producer of expandable polystyrene with a capacity share of 22% in the region.
CPChem and Nova Chemicals have market reach within North America and CPChem participates in the Middle East and Asian markets through JVs in Qatar, Saudi Arabia, and Singapore. CPChem is a pioneer and a licensor of HDPE slurry loop technology, said Chitalia, while Nova Chemicals is a major licensor of solution LLDPE technology. “Finally, CPChem’s on-purpose and full range alpha olefins capacities would complement well with Nova’s significant exposure to comonomer alpha olefins for the regional LLDPE production,” Chitalia said.
“Together, both companies would have total polyethylene capacity of 8.5 million tonnes/year. HDPE would account for 5.8 million tpy, while LLDPE would be little short of 2.5 million tpy. In North America, the two companies would account for 20% of the capacity share for total polyethylene. The combined capacity share would increase to around 25% for HDPE.
“The Nova acquisition would increase ethylene merchant exposure for CPChem. After the recent ethylene capacity increase at Cedar Bayou, Tex., CPChem was exposed to 500,000 tonnes of ethylene to the merchant market, while Nova, post its acquisition of Williams Geismar—a [Louisiana] cracker—is exposed to approximately 1 million tonnes of ethylene. Together, the companies would have ethylene volumes equivalent of a world-scale cracker size of 1.5 million tonnes.
“The petrochemical market is consolidating, with the main players—ExxonMobil, Saudi Aramco, LyondellBasell, Dow—expanding organically or through M&A. Since 2018, many petrochemical companies are under pressure owing to the slow economic growth outlook, the credit crunch in India-China, US-China trade war, and the plastic backlash. The deal with Nova Chemicals would allow Chevron and Phillips 66 to diversify further into this market while increasing competitiveness and market reach. North American ethane feedstock advantage makes the region an ideal location for acquisitions-expansions in the ethylene-polyethylene sector,” Chitalia said.