ADNOC’s Borouge poised to become leading petrochemicals firm

ADNOC's Borouge in talks with Borealis for M&A deal
ADNOC’s Borouge poised to become leading petrochemicals firm

The Abu Dhabi National Oil Company (ADNOC) is poised to lead what is to become one of the world’s largest petrochemicals firms. It is currently pursuing negotiations to acquire more shares at Austrian oil and industrial giant OMV Group.

Late last year, ADNOC announced its intentions to acquire 24.9 percent of OMV as part of its global expansion strategy. Russia’s invasion of Ukraine prompted the move, as it turned the global energy market into turmoil.

The deal will involve the merger of ADNOC’s Borouge with OMV’s Borealis.  The merged entity is expected to be worth over $30 billion.

ADNOC owns 54 percent of Borouge, which is listed on the Abu Dhabi Securities Exchange (ADX). Borealis owns 36 percent, while the remaining 10 percent is owned by retail and institutional investors. Meanwhile, OMV owns 75 percent of Borealis, with ADNOC holding a 25 percent share.

Merger significance

The union will create a mega petrochemicals firm capable of producing 8.8 mn tons of polyolefin annually. This is an essential ingredient for producing plastics and polymer solutions for various industries. Among the industries to benefit from increased production of this ingredient include agriculture and infrastructure. The energy, mobility, and healthcare sectors also stand to gain.

Essentially, ADNOC is acquiring the OMV shares of MubadaIa Investment Company, the UAE’s sovereign wealth fund. ADNOC and Mubadala said the move “marks the next major milestone for ADNOC as it accelerates its ambitious domestic and international chemicals growth strategy.”

Borouge and Borealis’ merger would turn them into one of the world’s top producers of polyolefin. The other top producers are China’s Sinopec and Saudi Arabia’s SABIC.

Read: ADNOC announces minority stake sale in ADNOC Gas on ADX

OMV outlines intentions

In July 2023, OMV’s Executive Board said it is pursuing negotiations with ADNOC with respect to their respective polyolefins business.

“Such cooperation would include a potential combination of the Borealis and Borouge businesses as equal partners under a jointly controlled, listed platform for potential growth acquisitions to create a global polyolefin company with a material presence in key markets,” the OMV Board said.

Borealis is one of the world’s leading providers of advanced and sustainable polyolefin solutions. It is also a European front-runner in polyolefin recycling. Borouge has an equally important market share worldwide, especially in Asia. This region has high demand for polyolefin for its booming industrial and healthcare sectors.

Analysts describe the move as further strengthening the ties between the UAE and Austria. It will also create a long-term, stronger market value globally for ADNOC, Mubadala and OMV.

Potential challenges

Based on media reports, OMV said both Borealis and Borouge would become “equal partners under a jointly controlled, listed platform for potential growth acquisitions to create a global polyolefins company”.

Meanwhile, ADNOC said it is “undertaking these negotiations as majority shareholder of Borouge” with OMV as majority shareholder in Borealis. According to the UAE’s state-owned oil company, “Any final decision is subject to Borouge’s, and other relevant parties’ and governance processes.”

With the final details still pending, as negotiations are underway, industry experts believe a potential issue could be determining who will have the controlling stake, and with it the management upper hand.

In addition, another dilemma that the combined group could face is the issue of ‘listing’. A dual listing in both UAE and Austria is possible but would have cost implications. Moreover, the combined entity would have to comply with two regulatory authorities.

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