OMV AG, Vienna, has entered a deal to take controlling interest of Borealis AG, one of Europe’s leading petrochemical companies.
OMV—which currently owns a 36% stake in Borealis—has agreed to buy an additional 39% interest from Mubadala Investment Co. for $4.68 billion, to raise its overall ownership interest in the European petrochemical manufacturer to 75%, the company said on Mar. 12.
Pending regulatory approvals, the proposed transaction is scheduled to close by yearend 2020.
As part of the deal, OMV will be entitled to all dividends in relation to additional shares in Borealis distributed after Dec. 31, 2019, and will fully consolidate Borealis results in its financial statements.
OMV said the proposed acquisition comes as part of a strategy to expand its business into high-value chemicals, providing a natural hedge against the cyclicality of each value-chain step with respect to both volumes and market spreads, derisking the company’s exposure to volatile markets.
With global demand for monomers and polymers growing rapidly, obtaining a controlling majority in Borealis will position OMV as a leading provider of polyolefins and base chemicals, including becoming Europe’s number one producer of ethylene and propylene as well as one of the top-10 global polymer producers, according to the operator.
“This [transaction] turns OMV into a global oil, gas, and chemicals group, whose integrated business model extends from the wellhead to high-quality plastic and repositions the [g]roup for a low-carbon future,” said Rainer Seele, OMV’s chief executive officer and chairman of its executive board.
Concurrent with announcing the proposed deal, OMV also has announced a €2-billion divestment program through yearend 2021 to help finance the transaction. The operator said additional financing will be supported by realized synergies of €700 million through yearend 2025 resulting from reduced costs, streamlined operations, and tax benefits.
In addition to its divestment program and realized synergies, OMV said it will fund the deal by optimizing its cash outflows via postponement or reevaluation of already planned projects. In 2020, the company will cut its planned organic investments by €200 million to €2.2 billion, as well as critically scrutinize future investment plans for the next few years.
For Mubadala—which will retain a 25% interest in Borealis following the transaction’s close—the proposed Borealis stock sale complements the investment company’s holdings in both operators.
“We will continue to hold a significant interest in [Borealis], through the direct 25% interest that we will retain, along with our existing 24.9% shareholding in OMV. As a significant shareholder in OMV, we recognize the strong strategic fit and the complementary nature of Borealis’s business in expanding its downstream position,” said Musabbeh Al Kaabi, CEO of Mubadala’s Petroleum & Petrochemicals division.
Sustainability goals
The proposed deal also aligns with OMV’s goal to ensure long-term sustainability of its global operations.
“The market for sustainable chemicals, and the circular economy volumes, is very interesting and showing strong growth. Both OMV and Borealis have recognized this opportunity and will now combine forces. This extends the value chain even further, namely beyond the life cycle of plastic products,” said Thomas Gangl, OMV’s chief downstream operations officer.
Specifically, OMV said Borealis’s activities in plastic recycling, such as recycling plants EcoPlast (Austria) and MTM Plastics (Germany), Project STOP, and the Design For Recycling initiative perfectly complement OMV’s ReOil technology, which chemically recycles old plastics into synthetic crude that can be used in traditional refinery processes for production of finished products.
OMV currently owns and operates three traditional refineries, including the 9.6 million-tonnes/year integrated refinery and petrochemical complex in Schwechat, Austria; the 3.8 million-tpy refinery in Burghausen, Germany; and the 4.5 million-tpy Petrobrazi refinery in the southeast region of Romania, near Ploiesti City.
Borealis overview
As part of its international holdings, Borealis participates in two major joint ventures engaged in ongoing expansions of petrochemical production in the United Arab Emirates (UAE) and the US.
Most recently, Abu Dhabi Polymers Co. Ltd. (Borouge), a JV of Abu Dhabi National Oil Co. and Borealis, let a contract to Axens of France to provide technology licensing for a suite of new units for the proposed fourth expansion of Borouge’s integrated polyolefins complex in Ruwais, about 250 km west of Abu Dhabi City, UAE (OGJ Online, Jan. 17, 2020).
As part of the licensing contract for the Borouge 4 project, Axens will supply a 124,000-tpy methyl tertiary butyl ether (MTBE) coupled with a 50,000-tpy 1-butene production unit, as well as a 75,000-tpy unit based on its proprietary AlphaHexol technology for production of high-purity 1-hexene by ethylene trimerisation suitable as comonomer for various types of polyethylenes (PE), including linear low-density polyethylene (LLDPE) or high-density polyethylene (HDPE) production. The project also will include the addition of a methyl acetylene and propadiene (MAPD) unit, a C4 hydrogenation unit, and a second-stage pygas hydrogenation unit for downstream of the project’s new steam cracker.
Now under construction at the same location of the operator’s three existing plants, the Borouge 4 complex will host what will become the world’s largest mixed-feed cracker with an estimated ethylene output of 1.8 million tpy as well as a total olefins and aromatics production capacity of 3.3 million tpy using a variety of feedstocks such as ethane, butane, and naphtha from ADNOC’s refining and gas processing operations. Alongside ethylene, the cracker and its derivative units also will produce propylene, butadiene, MTBE, 1-butene, pygas,1-hexene, and benzene, with ethylene and propylene to be converted into PE and polypropylene (PP) products.
A fifth PP plant (PP5) also is now under construction at the site that will have a maximum production capacity of 480,000 tpy. While the PP5 project—which will expand the operator’s PP production capacity by more than 25% to 2.24 million tpy—is scheduled to be completed during third-quarter 2021, the Borouge 4 expansion remains on schedule for startup sometime in 2023.
The projects come as part of Borouge’s plan to more than double the current 4.5 million-tpy capacity of its production site by 2030.
In the US, Bayport Polymers LLC (Baystar)—an equal JV of Total SA’s Total Petrochemicals & Refining USA Inc. and the Borealis-Nova Chemicals Inc. JV Novealis Holdings LLC—is currently progressing with construction of a 625,000-tpy Borstar PE unit as part of the Baystar Bay 3 project at its production site in Pasadena, Tex. (OGJ Online, Mar. 1, 2019).
Scheduled for startup in 2021, the Borstar PE plant project comes as part of Baystar’s strategy to help meet growing global demand for PE by taking advantage of competitively priced ethane feedstock from US shale production and easy export access to markets abroad and follows official start of construction on Baystar’s 1 million-tpy ethane steam cracker at Total’s 200,000-b/d integrated refining complex in Port Arthur, Tex. The $1.7-billion ethane steam cracker—which will supply feedstock both for Baystar’s existing 400,000-tpy PE unit as well as the new Borstar unit—remains on schedule for commissioning in late 2020.
In January, Borealis signed an agreement with Nova Chemicals to acquire the latter’s 50% ownership interest in Novealis Holidings to boost Borealis’s stake in the Baystar JV to a full 50%. Subject to customary regulatory approvals, that transaction is scheduled to close by midyear, Baystar said in a Jan. 9 release.
Following close of its proposed deal with Mubadala, OMV said it will consolidate Borealis’s 40% share in Borouge and 50% share in Baystar at-equity.
