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Abu Dhabi in talks with Austria’s OMV to form $30bn chemicals giant

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Doha: Abu Dhabi and Austria’s OMV AG is exploring a merger of Borouge Plc and Borealis AG to create a chemical conglomerate worth more than US$30 billion (RM139.57 billion), according to people familiar with the matter. and plastic companies.

The sources said the owners are discussing the potential valuation and ownership structure of the combined entity and could agree on the general framework for formal merger talks in the coming weeks.

Talks have been going on and off for months but could still be delayed or collapse, they said. They requested anonymity because the deliberations are private.

Vienna-based Borealis is 75 percent owned by OMV and the remainder by Abu Dhabi National Oil Company (Adnoc).

Abu Dhabi-listed Borouge, itself a joint venture between ADNOC and Borealis, has a market capitalization of about US$22 billion (RM102 billion).

The two sides are discussing a possible valuation of Borealis at around US$10 billion (RM46.52 billion), including its stake in Borouge, the people said.

Taking into account potential synergies, the overall valuation of the combined entity could exceed US$30 billion (RM139.57 billion), the people said.

The exact value and ownership structure remain two key hurdles to any agreement and are still subject to change, they added.

The proposed deal would dovetail with the United Arab Emirates’ broader plans to attract investment and technology and build new industries and manufacturing capabilities.

State-owned ADNOC has been expanding Abu Dhabi’s refining and chemicals hub, finding more exports for its oil and gas production and producing plastics for consumer goods.

A Borealis-Borouge merger would simplify the ownership structure and could be aimed at creating a stronger rival to chemical rivals such as Saudi Basic Industries Corp (Sabic), according to Bloomberg Intelligence analysts Salih Yilmaz and Darja Lema.

“A potential transaction combining the two companies could result in significant synergies,” they wrote in a research note.

Abu Dhabi Energy Group and OMV are still discussing whether to take equal stakes in the combined entity, though they expect both to have equal control and decision-making power over the board, according to some of the people familiar with the matter.

In one scenario, Middle Eastern investors and Austrians would both end up with similar stakes, but both below 50 percent, with the rest made up by free float on the stock exchange, though ADNOC, they said. The company may end up with a slightly larger stake.

The Austrian side would also prefer to be based in Europe, where most of the business is located, even if the combined entity would be listed in Abu Dhabi, the people said.

Representatives for Adnoc and OMV declined to comment. Spokespeople for Borealis and Borouge questioned its owners.

Borouge went public last year in a US$2 billion (RM9.3 billion) initial public offering. The company, which produces specialty plastics used in manufacturing and consumer goods, reported sales of US$6.7 billion (RM31.17 billion) in 2022. Borealis has around 7,600 employees and produces plastics, chemicals and fertilizers.

The company’s total sales and other income were 12.2 billion euros ($13.3 billion or RM61.88 billion) last year, according to Borealis’ website.

The merger would give the two companies enormous competitive scale, simplify the ownership structure and create greater flexibility to invest and expand in Asia, where demand for chemicals and plastics continues to grow.

Still, a final deal cannot be assured given the various stakeholders, including the government.

The possible deal comes at a critical time for OMV, whose largest shareholder is the Austrian government, followed by the Abu Dhabi government.

OMV announced plans last year to transform from one of Eastern Europe’s largest fossil fuel companies into an integrated green business built around chemicals, recycling and electric vehicle infrastructure.

In February, the company confirmed a Bloomberg News report that it was considering selling some exploration and production assets as part of the shift.

Adnoc has been busy finding deals in this space. Chief Executive Sultan Al Jaber last month made an initial US$12 billion (RM55.83 billion) bid for German polymer producer Covestro AG.

The target’s management rejected the offer, citing the price as too low, but offered to discuss the deal on better terms.

The Abu Dhabi company is continuing to pursue a potential acquisition by Covestro and has been studying its next move, according to people familiar with the matter.

ADNOC could decide whether to raise its offer for Covestro as soon as in the next few weeks, the people said. A Covestro spokesman declined to comment.

Adnoc plans to invest US$150 billion (RM697.88 billion) to expand capacity in crude oil, natural gas and chemicals. It also invests in low-carbon energy. – Bloomberg



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