In a landmark move, Abu Dhabi National Oil Company (ADNOC) and Austria’s OMV are joining forces to create a $60 billion petrochemical powerhouse by merging their shareholdings in Borouge and Borealis. This strategic partnership will result in the formation of Borouge Group International, set to become one of the world’s largest polyolefin producers. The new entity will list on the Abu Dhabi Securities Exchange (ADX) and plans a dual listing on the Vienna Stock Exchange (ATX) in the future.
Background and Strategic Partnership
ADNOC and OMV have a long-standing partnership that spans over 25 years. Their collaboration has been instrumental in driving growth and innovation in the petrochemical sector. The latest agreement marks a significant milestone in their partnership, as they aim to create a global leader in polyolefins. Borouge, currently listed on ADX, is a leading petrochemical company that provides innovative polyolefin solutions for various industries, including energy, infrastructure, mobility, and healthcare.
Borealis, on the other hand, is a European market leader in base chemicals and polyolefins, known for its advanced and circular solutions. By combining these strengths, Borouge Group International will leverage the best of both worlds to expand its global footprint and enhance its product portfolio.
The Merger and Acquisition
The merger involves combining ADNOC’s Borouge with OMV’s Borealis under Borouge Group International. This new entity will be jointly owned by ADNOC and OMV, with each holding a 46.94% stake. The remaining shares will be held by other investors following the listing on ADX.
In addition to the merger, Borouge Group International will acquire Nova Chemicals, a North American polyolefin producer, for an enterprise value of $13.4 billion. Nova Chemicals is renowned for its advanced packaging solutions and proprietary technologies, which will further strengthen Borouge Group International’s presence in North America and enhance its access to advantaged feedstock.
Financial and Strategic Implications
The creation of Borouge Group International is expected to generate significant value for both ADNOC and OMV. OMV will inject approximately €1.6 billion into the new company to equalize shareholdings, with adjustments for dividends paid until completion.
The acquisition of Nova Chemicals will be funded through acquisition debt, which is expected to be refinanced in the capital markets. The deal implies an enterprise value to EBITDA multiple of around 7.5, based on an expected through-the-cycle EBITDA of $1.8 billion for Nova Chemicals.
Borouge Group International aims to raise $4 billion on the equity capital markets to enhance its investment-grade credit rating and achieve relevant MSCI index inclusion. The company targets a through-the-cycle net leverage of up to 2.5 times EBITDA.
Growth and Synergies
The new entity is poised to unlock substantial synergies, with an estimated annual run-rate EBITDA synergy potential of approximately $500 million. It is expected that 75% of these synergies will be realized within the first three years after closing.
Borouge Group International will also benefit from the inclusion of Borouge 4, an ethylene and polyethylene expansion project currently under development. Once fully operational, Borouge 4 is expected to be recontributed to Borouge Group International by the end of 2026 for an estimated $7.5 billion. This project is anticipated to contribute around $900 million annually to the company’s EBITDA.
Listing and Dividend Strategy
Borouge Group International will be listed on ADX, with plans for a dual listing on ATX in the future. This listing strategy is designed to increase visibility and attract a broader investor base, enhancing the company’s market presence and liquidity.
The company has committed to a minimum annual floor dividend of $2.2 billion, with OMV expected to receive around $1 billion annually. This dividend strategy underscores the commitment to delivering strong returns to shareholders while supporting OMV’s attractive shareholder distributions.
Market Impact and Future Prospects
The formation of Borouge Group International marks a significant shift in the global petrochemical landscape. By combining the strengths of Borouge and Borealis and acquiring Nova Chemicals, the company will become the world’s fourth-largest polyolefins producer. This strategic move positions Borouge Group International to capitalize on growing demand for chemicals and associated products, particularly in the Americas and Asia.
ADNOC’s Managing Director and Group CEO, Dr. Sultan Ahmed Al Jaber, highlighted the transformative nature of these transactions, stating that they solidify Abu Dhabi’s status as a leader in the chemicals sector. The partnership is expected to drive value creation and growth opportunities for shareholders while meeting the increasing global demand for chemicals.
OMV’s Chairman of the Executive Board and CEO, Alfred Stern, emphasized that this agreement accelerates OMV’s growth strategy in chemicals, supporting its transformation into an integrated sustainable chemicals, fuels, and energy company. Together, OMV and ADNOC aim to increase sales volumes of innovative polyolefin premium products and be at the forefront of renewable and circular economy solutions.
The creation of Borouge Group International represents a pivotal moment in the petrochemical industry, marking the emergence of a new global leader. With its strong foundation in strategic partnerships, innovative products, and a robust growth strategy, Borouge Group International is well-positioned to drive significant value creation and growth in the years to come. As the company prepares for its listing on ADX and future expansion plans, it is poised to make a lasting impact on the global chemicals market.
