OMV to acquire 39% additional shareholding in Borealis from Mubadala for $4.68bn

Published: 15 March 2020 - 5 a.m.
By: Martin Menachery
OMV and Mubadala Investment Company signed an agreement that will give OMV a controlling stake in Borealis, one of Europe’s leading petrochemical companies. OMV, which currently owns a 36% stake in Borealis, will acquire an additional 39% from Mubadala, increasing its stake to 75%. Mubadala will retain a 25% interest. The closing of the transaction is expected by the end of 2020 and is subject to regulatory approvals.

Pursuant to the agreement, OMV is entitled to all dividends in relation to the additional shares in Borealis distributed after 31 December 2019. OMV will fully consolidate the results of Borealis in its financial statements. In 2019, Borealis generated worldwide total sales of $10.89bn and a net profit of $969.32mn.

Rainer Seele, chairman of the OMV executive board and CEO, said: “This transaction is not just another milestone in the implementation of our strategy, but the biggest transformation in OMV’s history. This 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 group for a low-carbon future.

The global demand for monomers and polymers is growing rapidly, driven by strong long-term economic growth and improving living standards in the emerging countries and a steady economic development in the mature economies. Obtaining a controlling majority in Borealis makes OMV a leading provider of polyolefins and base chemicals. The joint production capacities make OMV the number one producer of ethylene and propylene in Europe and one of the top 10 polymer producers worldwide. The acquisition is a strategic extension of OMV’s value chain into high-value chemicals. This provides a natural hedge against the cyclicality of each value chain step with respect to both volumes and market spreads, de-risking OMV’s exposure to volatile markets.

Musabbeh Al Kaabi, CEO, petroleum and petrochemicals, Mubadala, said: “We remain very confident in Borealis as a leading company in its sector. We will continue to hold a significant interest in the company, 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 recognise the strong strategic fit and the complementary nature of Borealis’ business in expanding its downstream position.

With its head office in Vienna, Austria, Borealis currently has around 6,900 employees and operates in over 120 countries. The company provides services and products to customers globally, in collaboration with Borouge, a joint venture with ADNOC, and with Baystar, a joint venture with Total in Texas, USA. Borealis has delivered consistently strong financial results. As a further consequence of this transaction, OMV will consolidate the 40% share of Borealis in Borouge and 50% share in Baystar at equity.

“The market for sustainable chemicals, and the circular economy volumes, is very interesting and showing strong growth. Both OMV and Borealis have recognised this opportunity and will now combine forces. This extends the value chain even further, namely beyond the life cycle of plastic products”, Thomas Gangl, executive board member and chief downstream operations officer, said.

Borealis’ activities in plastic recycling, such as recycling plants EcoPlast (Austria) and MTM Plastics (Germany), Project STOP (Ocean Waste) and the Design For Recycling (DFR) initiative are a perfect addition to OMV’s ReOil technology for chemical recycling of post-consumer-plastic to synthetic crude.

The financing of the transaction is supported by a divestment programme, synergies and an active cash flow management. With the transaction, OMV announced a divestment programme of $2.22bn until the end of 2021. In addition to that, OMV expects to realise synergies of $778.27mn until the end of 2025, coming from reduced costs, streamlined operations and tax benefits.

OMV will also optimise its cash outflows by postponing, or re-evaluating already planned projects. In 2020, the planned organic investments for OMV will be cut by $222.36mn to $2.45bn. The investment plans for the next years will be also scrutinised critically. Due to these measures as well as OMV’s strong organic free cash flow generation, the group expects to reduce its gearing ratio excluding leases to around 30% by the end of 2021, while reconfirming its progressive dividend policy.

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