FocusIPIC-Nova tie-up would reap polyolefin synergies – sources

24 February 2009 10:45  [Source: ICIS news]

By Chow Bee Lin and Prema Viswanathan

BorealisSINGAPORE (ICIS news)--The acquisition of NOVA Chemicals by Abu Dhabi sovereign wealth fund the International Petroleum Investment Co (IPIC) would yield strong synergies in the companies’ polyolefin assets, sources close to the companies said on Tuesday.

IPIC had revealed plans to buy Canadian petrochemicals producer NOVA 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.

The synergy between the two companies on feedstocks was quite strong, with both having access to competitively priced gas, sources said. Equally strong was their synergy on technology, the sources added.

NOVA is a major polyethylene (PE) technology licensor, while Borealis, of which IPIC is a major shareholder, has Borstar PE and polypropylene (PP) technologies.

The acquisition of NOVA would also increase IPIC’s footprint in North America where it had only a marginal presence through its shareholding in Borealis, one of Europe’s largest polyolefin producers, according to the sources. 

Borealis has only compounding facilities in North America but NOVA operates two gas-based PE plants in Canada with a 1.68m tonnes/year combined capacity. They produce various PE grades, including metallocene and roto moulding linear low density PE (LLDPE).

IPIC’s existing small presence in North America could also mean that NOVA's operations in the region were unlikely to change significantly after the acquisition, one of the sources said.

IPIC holds a 64% stake in Borealis with OMV Aktiengesellschaft, the European oil and gas group, holding the balance of 36%.

The acquisition could also enable IPIC, through its ownership of Borealis, to expand its portfolio in the Middle East to include metallocene LLDPE, the same source said.

"Borouge [which is co-owned by Borealis] is likely to build a metallocene LLDPE plant in Abu Dhabi based on NOVA Chemicals' technology, if the acquisition comes through," the source added.

Borealis and the Abu Dhabi National Oil Company (ADNOC) are joint venture partners in Borouge, a polyolefins producer in Abu Dhabi.

NOVA has no production facilities in the Middle East but Borouge runs a 600,000 tonnes/year high density polyethylene (HDPE)/LLDPE swing plant in Abu Dhabi that produces mainly HDPE pipe, film and cable grades.

NOVA had previously looked for a presence in the Middle East and took part in negotiations with Qatar Petroleum several years ago. Being acquired by IPIC was in line with these aspirations, a second source said.

Borealis and Borouge currently have a 3.6m tonnes/year combined PE capacity globally.

Borouge is in the process of expanding its Abu Dhabi facilities, which will double its PE capacity and bring on stream a new 800,000 tonnes/year polypropylene (PP) plant after completion next year.

NOVA's styrenics business, which was spun off into joint venture Ineos Nova Chemical Corp, had some synergy with Borealis and Borouge, according to a third industry source.

"Borealis and Borouge are both application-oriented companies, who are trying to offer solutions to their customers in segments such as packaging and automobiles," he said. "Adding styrenics to their polyolefins portfolio can actually add value to these solutions."

IPIC would be able to exercise its buy option in NOVA if there were no other interested bidders by the end of May, the first source said.

($1 =  €0.79)

For more on PE and PP visit ICIS chemical intelligence
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By: Prema Viswanathan
+65 6780 4359

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