Adnoc and OMV in talks to create global petrochemicals company

The proposed merger of shareholdings in Borouge and Borealis will create new entity

Adnoc's offices in Abu Dhabi. The state energy company acquired a 24.9 per cent stake in OMV in December. Photo: Adnoc

Abu Dhabi National Oil Company has entered into formal negotiations with Austrian energy company OMV on the creation of a new combined petrochemicals holding entity.

The companies are proposing to merge their respective shareholdings in Borouge and Borealis.

The state energy company is negotiating as majority shareholder of Borouge and OMV as majority shareholder in Borealis. Any decision is subject to Borouge’s and other relevant parties’ governance processes, Adnoc said on Saturday.

“The potential merger would mark the next transformative milestone in Adnoc’s ongoing value creation and chemicals growth strategy, with any transaction subject to customary regulatory clearances,” the company said.

The OMV executive board has decided to pursue negotiations with Adnoc on a potential co-operation with respect to their polyolefins businesses, the Austrian company said.

“Such co-operation 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,” it added.

OMV said any transaction depended on a number of criteria, including the valuation of both businesses as well as the approval of the Austrian group's management and supervisory boards and antitrust authorities.

Adnoc acquired a 24.9 per cent stake in OMV from Abu Dhabi’s strategic investment arm Mubadala Investment Company in December. The financial terms were not disclosed.

Through the investment in OMV, which holds a 75 per cent stake in Austrian plastics maker Borealis, Adnoc increased its stakes in both Borealis and Borouge.

Vienna-listed OMV is among Europe’s largest energy companies. The company produces and markets fuels as well as feedstock for the chemical industry, and operates three refineries in Europe. OMV operates around 1,800 filling stations in ten European countries.

Borealis, which is majority owned by OMV and based in Vienna, is the eighth-largest producer of compounds such as polythene and polypropylene used in packaging, plastics and acrylics industries.

It provides services and products to customers globally, both directly and in collaboration with Borouge, a joint venture with Adnoc.

Adnoc bought Mubadala’s 25 per cent stake in Borealis last April. The deal will allow the state-owned oil and gas producer to expand its international footprint in the fast-growing chemicals and petrochemical sector.

In October 2020, Mubadala reduced its stake in Borealis to 25 per cent after it sold 39 per cent to OMV in a $4.68 billion deal.

The Borouge petrochemical complex in Al Ruwais Industrial City. Photo: Borouge

Borouge, the joint venture between Adnoc and Borealis, is listed on the Abu Dhabi Securities Exchange. In May last year, Borouge raised $2 billion through an initial public offering on the ADX.

After its listing, Borouge was included in the FTSE Global Equity Index Series, which is used by investors globally to guide asset-allocation decisions and support portfolio construction.

Established in 1998, Borouge is a petrochemical company with a 3,100-plus workforce, serving customers in more than 50 countries across Asia, the Middle East and Africa.

It provides polyolefin solutions for the agricultural, infrastructure, energy, advanced packaging, mobility and healthcare industries.

Polypropylene, Borouge’s main product, is a thermoplastic material used in products including plastic packaging, car parts and textiles.

The global polypropylene market is projected to hit $167 billion by 2029, from about $121 billion in 2021, registering a compound annual growth rate of 4.2 per cent during the forecast period of 2022-2029, according to Data Bridge Market Research.

The UAE plans to triple its petrochemical production capacity from 4.5 million tonnes – currently produced entirely by the Borouge factory – by 2025.