Abu Dhabi snaps up Nova Chemicals

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Nova’s CEO, Jeffrey Lipton, has always been the great optimist of the petrochemical industry. As recently as December, he was arguing at the GPCA meeting that “demand forecasts will prove to be too low”, and forecasting a shortage of ethylene and polyethylene in 2012.

However, optimism isn’t a business strategy, particularly when it leads to over-leveraging the business. As the chart shows, Nova’s shares had fallen 95% since September. According to Bloomberg, Nova needed “to secure $100 million in additional financing by Feb. 28 and $100 million more by June 1”. So yesterday, Nova was instead forced to accept a $2bn offer from Abu Dhabi’s IPIC. Lipton himself acknowledged that “it was pretty clear that this was the best alternative, you have to deal with today”.

Nova’s strategic mis-step is Abu Dhabi’s gain. Nova benefits from advantaged feedstocks in the shape of Albertan ethane, has several excellent facilities and a highly professional workforce. With a sensible debt structure, it should now survive the present downturn. It should also be complementary to IPIC’s existing investments in Borealis and OMV. The blog wishes Nova well under its new owner.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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2 Responses to Abu Dhabi snaps up Nova Chemicals

  1. Arls 24 February, 2009 at 10:47 pm #

    I left NOVA’s employ two years ago after 24 years. The eternal optimism of Jeff Lipton has come at great cost to many current and former employees of NOVA. He, however, seems to have weathered the storms and somehow profited when others have incurred significant losses. I wish NOVA Chemicals and it’s employees world-wide, better days under what is sure to be better leadership!

  2. Dubai Lawyers Attorneys, Dubai Attorneys 26 April, 2012 at 10:14 pm #

    True, optimism isn’t a business strategy, particularly when it leads to over-leveraging the business. Read the last comment as well, hope things get better for Nova’s soon!

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