INEOS, Solvay form JV to merge Europe chlorvinyls production

LONDON (ICIS)–INEOS and Solvay have signed a definitive agreement for a joint venture which will merge their European chlorvinyls activities, the companies announced on Thursday.

The new entity, called INOVYN, is expected to be formed in the fourth quarter and will be headquartered in London.

It will have proforma 2013 sales of more than €3bn, with assets across 14 sites in Belgium, France, Germany, Italy, Norway, Spain, Sweden and the UK.

“We are delighted to have been able to reach this agreement, which will combine our respective chlorvinyls activities to create a world scale business,” said Chris Tane, CEO of INEOS ChlorVinyls.

“INOVYN will be better able to rapidly respond to changing European markets and increasing competition from global producers.”

Formation of the joint venture is subject to the implementation of an agreed remedy package consisting of the divestment of INEOS-owned assets in Tessenderlo, Belgium; Mazingarbe, France; Beek, in the Netherlands; Wilhelmshaven, Germany; and Runcorn in the UK.

Under the terms of the deal, Solvay will receive an up-front payment of €175m at closing, and in addition to transferring its chlorvinyls assets into the new business will also transfer €250m relating to pensions and environmental liabilities.

The Belgium-based chemical producer will then exit INOVYN after three years, leaving Switzerland-headquartered INEOS in sole control.

At that point, Solvay will receive additional cash proceeds targeted at €250m, with a minimum payment set at €75m, figures which are subject to adjustment depending on the financial performance of INOVYN during the joint venture period.

Governance of the joint venture, which was given clearance by the European Commission in May, will be shared between INEOS and Solvay with equal representation on the supervisory board. Capacity details were not disclosed.

Reaction from the European chlorvinyls market was mixed when the deal was first announced, with some suggesting consolidation was necessary to improve profitability and others predicting the merger could be a catalyst for production losses in the industry.