BP yesterday announced that it has agreed to sell its global petrochemicals business to INEOS for a total consideration of USD5 billion, subject to customary adjustments. Proceeds from the sale will be used by BP for general corporate purposes.
Under the terms of the agreement, INEOS will pay BP a deposit of USD400 million and will pay a further USD3.6 billion upon completion. An additional USD1 billion will be deferred and paid in three separate installments of USD100 million in March, April and May 2021 with the remaining USD700 million payable by the end of June 2021. Subject to regulatory and other approvals, the transaction is expected to complete by the end of 2020.
BP’s petrochemicals business is focused on two main businesses – aromatics and acetyls – each of which has leading technology and advantaged manufacturing plants, including a strong presence in growth markets in Asia. In total, the businesses have interests in 14 manufacturing plants in Asia, Europe and the U.S. and in 2019 produced 9.7 million tonnes of petrochemicals.
“Strategically, the overlap with the rest of BP is limited and it would take considerable capital for us to grow these businesses. As we work to build a more focused, more integrated BP, we have other opportunities that are more aligned with our future direction. Today’s agreement is another deliberate step in building a BP that can compete and succeed through the energy transition,” said Bernard Looney, BP chief executive officer.
INEOS is a leading global chemicals company with a network spanning more than 180 sites in 26 countries, employing some 22,000 staff worldwide. Over the past two decades, INEOS has acquired a number of businesses from BP, most notably the 2005 purchase of Innovene, the BP subsidiary that comprised the majority of BP’s then chemicals assets and two refineries, for USD9 billion.
“BP has had a long relationship with INEOS and this agreement reflects the mutual respect and trust that exists between us. It is a strategic deal for both parties that recognises both the high quality of the businesses and that INEOS is in many ways a natural owner for them,” said Brian Gilvary, BP’s chief financial officer, who led the negotiation with the owners of INEOS.
BP’s aromatics business is a global leader in the production of purified terephthalic acid (PTA), a key feedstock for the manufacture of polyester plastics, and its precursor paraxylene (PX). Its largest manufacturing plants are in China, the U.S. and Belgium and it licenses its leading PTA production technology to producers around the world.
The acetyls business produces acetic acid and derivatives such as acetic anhydride, which have uses in a wide range of sectors. It has a diverse base with manufacturing plants in the U.S., the UK, China, Korea, Taiwan and Malaysia. The sale will also include related interests such as the chemical recycling technology BP Infinia and BP’s interest in acetylated wood developer Tricoya.
In connection with this transaction, INEOS has an option to acquire from BP the research complex located at Naperville, Illinois, U.S.A., for an additional consideration or to enter into a lease or other arrangement for the same.
In total, the businesses included in the transaction currently employ more than 1,700 staff worldwide. These staff are expected to transfer to INEOS upon completion of the sale.
This agreement means that BP has now agreed USD15 billion of divestments and other disposals through 2019 and 2020 to date, an amount originally expected to be reached by mid-2021.