Adnoc/OMV merger to create US$60 bn chemical giant Borouge Group

Abu Dhabi National Oil Company and Austrian chemical firm OMV are set to merge their polyolefin businesses to create a chemicals powerhouse with a US$60 billion enterprise value, as the Gulf state oil company advances an aggressive growth strategy.

The merged entity will also acquire Canada's Nova Chemicals Corp from Abu Dhabi sovereign wealth fund Mubadala Investment Company for US$13.4 billion, including debt, as part of its strategy to expand in North America.

The jointly controlled joint venture company is envisaged to be named Borouge Group International and will be a joint platform for OMV and Adnoc for potential growth acquisitions in the polyolefins sector. It is set to be the fourth largest polyolefins firm by production capacity, behind China's Sinopec and CNPC and US-based ExxonMobil.

It will be headquartered in Austria, with regional headquarters in the UAE as well as will retain key corporate hubs in Calgary, Pittsburgh and Singapore. Borouge Group International will be listed on the Abu Dhabi Securities Exchange (ADX), subject to approval by the UAE Securities and Commodities Authority (SCA) and ADX.

Under the terms of the agreement, Adnoc and OMV will hold equal stakes of 46.94% in Borouge Group International, with joint control and equal partnership, with the remaining 6.12% in free float, subject to SCA approval and assuming all existing Borouge free float shareholders accept to exchange their existing shares in Borouge into shares in Borouge Group International.

The companies expect Borouge Group to generate annual cost savings of about US$500 million.

Borouge Group will combine two joint ventures - Borealis, 75% owned by OMV and 25% by Adnoc, and Borouge, 54% owned by Adnoc and 36% by Borealis.

Nova produces 2.6 million tonnes/year of PE and 4.2 million tonnes of ethylene.

Meanwhile, Borouge's expansion project, Borouge 4, will be acquired by the merged entity at cost, estimated to be around US$7.5 billion, including debt

The deal, subject to regulatory approvals, marks the conclusion of nearly two years of negotiations and is expected to be completed by 2026. 

Based on the expected share structure, Borouge Group could distribute total annual minimum dividends of around US$2.2 billion, OMV CEO Alfred Stern said.

OMV will inject EUR1.6 billion in cash into the new company, which will be listed in Abu Dhabi.

The injection, which will be adjusted by dividends paid out until completion, will equalise Adnoc and OMV's shareholding.

Each will own nearly 47% of the new entity, with the remainder available as free float.

Adnoc had already agreed last year to buy German chemicals maker Covestro for EUR14.7 billion including debt.

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