OMV, the international integrated gas and oil company headquartered in Vienna, Austria, and Mubadala Investment Company, the Abu Dhabi-based strategic investment company, have signed an agreement that will give OMV a controlling stake in Borealis, one of Europe’s leading petrochemical companies.
OMV, which currently owns a 36% stake in Borealis, will acquire an additional 39% from Mubadala, increasing its stake to 75%. Mubadala will retain a 25% interest. The closing of the transaction is expected by the end of 2020 and is subject to regulatory approvals.
Pursuant to the agreement, OMV is entitled to all dividends in relation to the additional shares in Borealis distributed after 31 December 2019. OMV will fully consolidate the results of Borealis in its financial statements. In 2019, Borealis generated worldwide total sales of EUR9.8 billion (USD11.1 billion) and a net profit of EUR872 million (USD989.7 million).
“This transaction is not just another milestone in the implementation of our strategy, but the biggest transformation in OMV’s history. This turns OMV into a global oil, gas and chemicals group, whose integrated business model extends from the wellhead to high-quality plastic and repositions the Group for a low carbon future,” said Rainer Seele, chairman of the OMV Executive Board and CEO.
The global demand for monomers and polymers is growing rapidly, driven by strong long-term economic growth and improving living standards in emerging countries and a steady economic development in mature economies.
Obtaining a controlling majority stake in Borealis makes OMV a leading provider of polyolefins and base chemicals. The joint production capacities make OMV the largest producer of ethylene and propylene in Europe and one of the top 10 polymer producers worldwide. The acquisition is a strategic extension of OMV’s value chain into high value chemicals. This provides a natural hedge against the cyclicality of each value chain step with respect to both volumes and market spreads, de-risking OMV’s exposure to volatile markets.
“We remain very confident in Borealis as a leading company in its sector. We will continue to hold a significant interest in the company, through the direct 25% interest that we will retain, along with our existing 24.9% shareholding in OMV. As a significant shareholder in OMV, we recognize the strong strategic fit and the complementary nature of Borealis’s business in expanding its downstream position,” Musabbeh Al Kaabi, CEO, Petroleum & Petrochemicals, Mubadala, said.
With its head office in Vienna, Austria, Borealis currently has around 6,900 employees and operates in more than 120 countries. The company provides services and products to customers globally, in collaboration with Borouge, a joint venture with the Abu Dhabi National Oil Company (ADNOC) and with Baystar™, a joint venture with Total in Texas, U.S.A. Borealis has delivered consistently strong financial results. As a further consequence of this transaction, OMV will consolidate the 40% share of Borealis in Borouge and 50% share in Baystar at-equity.
“The market for sustainable chemicals, and the circular economy volumes, is very interesting and showing strong growth. Both OMV and Borealis have recognized this opportunity and will now combine forces. This extends the value chain even further, namely beyond the life cycle of plastic products,” said Thomas Gangl, executive Board Member and chief operations officer, Downstream.
Borealis’ activities in plastic recycling, such as recycling plants EcoPlast (Austria) and MTM Plastics (Germany), Project STOP (Ocean Waste) and the Design For Recycling (DFR) initiative are a perfect addition to OMV’s ReOil technology for chemical recycling of post-consumer-plastic to synthetic crude.
The financing of the transaction is supported by a divestment program, synergies and an active cash flow management. With the transaction, OMV announced a divestment program of EUR2 billion (USD2.2 billion) until the end of 2021. In addition, OMV expects to realize synergies of EUR700 million (USD794.5 million) until the end of 2025, from reduced costs, streamlined operations and tax benefits. OMV will also optimize its cash outflows by postponing or re-evaluating already planned projects.
In 2020, the planned organic investments for OMV will be cut by EUR200 million (USD227 million) to EUR2.2 billion (USD2.5 billion). The investment plans for the next years will also be scrutinized critically.