UpdateAbu Dhabi IPIC may close on NOVA within 75 days

23 February 2009 17:11  [Source: ICIS news]

NOVA Corunna site in Canada(adds new lead, details throughout)

HOUSTON (ICIS news)--The acquisition of NOVA Chemicals by an Abu Dhabi sovereign wealth fund could close in 60-75 days, giving the Canadian producer a financial lifeline and the Abu Dhabi fund access to technology, NOVA CEO Jeff Lipton said on Monday.

The fund, the International Petroleum Investment Co (IPIC), plans to buy NOVA Chemicals in a $2.3bn (€1.8bn) deal worth $6/share, a premium of almost 3.5 times higher than the company's Friday close on the New York Stock Exchange.

NOVA stock rose more than $4/share, or over 300%, on the news of the IPIC deal.

IPIC made its offer as NOVA approached a 28 February deadline to raise $100m. Without the money, NOVA could lose access to its current credit facilities.

All three major global credit watchdogs had cut NOVA’s rating due to concerns over its ability to refinance debts.

Lipton said in a conference call the IPIC offer was best option among the several alternatives considered by NOVA.

The company had considered private- and public-equity deals as well as continued borrowing and the chances that bond markets would recover, Lipton said. "This was the best of the alternatives."

Despite the premium of the IPIC deal, the fund is still getting a good deal, Lipton said. He estimated that it would cost IPIC $10bn-11bn, excluding debt, to build a company similar to NOVA from the ground up.

Even with debt, the fund's offer is substantially lower than replacement costs, he said.

The low price reflects the tightened credit market that is pummelling NOVA and other petrochemical producers that are leveraged and vulnerable to volatile business cycles, Lipton said.

In previous years, NOVA would have attracted a much higher bid - one questioner during the call placed such a hypothetical offer at $40/share.

Times have changed, however, and NOVA must consider current market trends, Lipton said.

"You have to not only look at the fundamental value of the company, but you also have to look at what you might have to face in terms of financing and support," Lipton said. "You have to deal with today."

Before the deal closes, IPIC will have to overcome regulatory hurdles, including those that apply to sovereign-wealth funds, Lipton said. Nonetheless, regulators will likely approve the deal with relatively few complications, since NOVA and IPIC's holdings have little overlap.

NOVA's US assets do not present any critical security issues, smoothing out any regulatory obstacles there, Lipton said. "I don't expect any significant issues anywhere."

The deal will resolve NOVA's liquidity crunch and give the company exposure to new markets in the Middle East and other regions, Lipton said. At the same time, NOVA will keep its name and remain an on-going company.

For its part, IPIC will get full access to NOVA's engineering, process and product technology, Lipton said. "They see that as a real long-term value."

Wholly owned by the government of Abu Dhabi, IPIC already has a foothold in the petrochemicals industry, holding stakes in Austria’s OMV and Borealis among other producers.

($1 = €0.78)

Additional reporting by Mark Watts

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By: Al Greenwood
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