Royal Dutch/Shell and BASF AG are negotiating a deal to combine their polyolefins businesses into a 50-50 joint venture with a combined turnover of more than $6 billion/year.
The companies anticipate that a deal could be ready for signature by yearend. The combine would be based in the Netherlands and would be the world's largest producer of polypropylene and the fourth largest polyethylene maker.
The plan is apparently driven by a need to cut unit costs in the face of overcapacity and low margins in the European petrochemicals sector.
The JV would comprise the assets of Shell's Montell subsidiary, BASF's Targor JV, and the Shell/BASF Elenac combine. Montell is wholly owned by Shell and has 30 manufacturing plants worldwide, with combined capacity to produce 4 million tonnes/year of poly- propylene, 270,000 tonnes/year of polypropylene composite materials, and 220,000 tonnes/year of polyethylene.
Targor is a 50-50 European JV of BASF and Germany's Celanese AG; it has capacity to produce 1.4 million tonnes/year of polypropylene. The new plan calls for BASF to buy out Celanese's 50% interest.
Elenac is owned equally by BASF, Deutsche Shell, and Shell Chemie and produces more than 2 million tonnes/year of polyethylene at sites in the UK, Germany, France, and Spain.
Evert Henkes, CEO of Shell Chemicals, said: "The proposed merger would bring together established technical strengths, global reach, and an extensive product portfolio."
Negotiations for the JV were said to be at an advanced stage. Shell added that, once the discussions are completed, a more detailed announcement would be made.