Abu Dhabi, OMV in Talks to Form $30 Billion Chemicals Giant

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(Bloomberg) — Abu Dhabi and Austria’s OMV AG are exploring a combination of Borouge Plc and Borealis AG to create a chemicals and plastics company worth more than $30 billion, people familiar with the matter said. 

The owners are discussing the potential valuation and ownership structure of a combined entity and may reach the broad outlines for formal merger negotiations in the coming weeks, according to the people. Talks have been on-and-off for several months and could still be delayed or fall apart, they said, asking not to be identified because deliberations are private.

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Vienna-headquartered Borealis is 75% owned by OMV, with the remainder held by Abu Dhabi National Oil Co. Abu Dhabi-listed Borouge is itself a partnership between Adnoc and Borealis and has a market value of about $22 billion.

The two parties are discussing a possible valuation of about $10 billion for Borealis, including its Borouge stake, the people said. After taking into account potential synergies, the overall valuation of the combined entity could exceed $30 billion, the people said. The exact value and ownership structure remain the two key hurdles for any agreement and may still change, they said.

OMV shares were up 5.4% at 3:12 p.m. Tuesday in Vienna, on track for the biggest daily gain since October. 

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The Abu Dhabi energy group and OMV are still discussing whether they would have the same stake in the merged entity, though they envision the two parties having equal control of the board and decision-making capabilities, according to some of the people. Under one scenario, both the Mideast investor and Austrians would eventually hold similar stakes that are less than 50%, with free float on the stock exchange making up the rest, though Adnoc could end up with a slightly larger share, they said.

The Austrian side would also prefer to have the headquarters in Europe, where most of the operations are, even if the combined entity was listed in Abu Dhabi, the people said. Representatives for Adnoc and OMV declined to comment. Spokespeople for Borealis and Borouge couldn’t immediately be reached for comment. 

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Borouge went public last year in a $2 billion initial public offering. The company, which makes specialty plastics for manufacturing and consumer goods, reported $6.7 billion in sales in 2022. Borealis employs about 7,600 people and makes plastics, chemicals and fertilizers. It had total sales and other income of €12.2 billion ($13.3 billion) last year, according to the Borealis website. 

A combination would give the companies significant scale to compete, simplify the ownership structure and create more flexibility to invest and expand in Asia, where demand for chemicals and plastics continues to rise. Still, given the various stakeholders, including governments, reaching a final agreement is not ensured. 

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The possible deal comes at a pivotal time for OMV, whose biggest shareholders are the Austrian government followed by Abu Dhabi sovereign wealth fund Mubadala Investment Co. OMV last year announced plans to transform itself from one of eastern Europe’s biggest fossil-fuel companies to an integrated green enterprise built around chemicals, recycling and electric-vehicle infrastructure. This February, it confirmed a Bloomberg News report that it’s considering selling some exploration and production assets as part of that shift.

Adnoc has been busy hunting for deals in this space. Chief Executive Officer Sultan Al Jaber last month made a preliminary $12 billion takeover approach for German polymers producer Covestro AG, people with knowledge of the matter said. The target’s management rejected the proposal as too low, though signaled it’s open to discussing the deal at better terms.

Adnoc, which pumps almost all the oil in OPEC member United Arab Emirates, plans to invest $150 billion to expand production capacity for crude, natural gas and chemicals. It’s also investing in low-carbon energy. 

(Updates with share move in fifth paragraph.)

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