Chemicals and plastics major Nova Chemicals Corp. of Calgary, Alberta, has agreed to be acquired by a petroleum and petrochemicals company based in the United Arab Emirates.
International Petroleum Investment Co. of Abu Dhabi has agreed to pay US$6 per share, a premium of 348 percent over Nova's Feb. 20 closing price. The total value of the agreement, including assumption of Nova debt, is about US$2.3 billion.
“The acquisition will provide enhanced balance sheet strength for Nova and facilitate Nova's growth internationally,” IPIC Managing Director Khadem Al Qubaisi said in a Feb. 23 news release. “We can provide stability and allow Nova to meet its operational and financial requirements while continuing to expand and invest in its business.”
Nova has been struggling with cash liquidity, which helped to drive its share price down from $25 per share in mid-September. As part of the acquisition, IPIC has agreed to provide a US$250 million credit backstop facility to address liquidity issues.
Nova stressed it will continue to manage its operations as an independent chemicals and plastics company, and will continue to invest in its Canadian factories and its large research facility in Calgary. IPIC encourages significant management autonomy and has no plan to change Nova's current operations, both firms said.
Nova's polyethylene business has turned a corner with increased sales due to low inventory levels at processor plants, Chief Executive Officer Jeff Lipton said in a Feb. 23 conference call.
Lipton told investors and analysts that the IPIC offer is the best alternative for Nova. The company also considered private and public equity deals, bond markets and the status quo, he said. While Nova had focused on generating cash and meeting near-term requirements, IPIC likely will bring a longer-term view to the business, Lipton said.
Nova brings to the table its advanced Sclairtech PE process technology, which IPIC might want to use in other operations, Lipton said. Nova's operations — which are weighted to North America — will complement, rather than overlap, IPIC facilities in Europe, the Middle East and Asia, he said.
Nova does not expect any regulatory hurdles, Lipton said. The company will hold a special shareholders meeting in April to vote on the agreement.
Canadian Industry Minister Tony Clement said Feb. 24 that he would review the deal to determine if it benefits Canada's economy — something he's legally bound to do in cases where companies are worth C$312 million (US$251 million) or more.
Nova produces PE at plants in Joffre, Alberta, and Corunna and Moore Township, Ontario. Its Ineos Nova LLC joint venture makes styrene and polystyrene. Nova also has expandable PS and engineering PS production in Beaver Valley, Pa., and Painesville, Ohio. Lipton estimated the replacement value for Nova's assets at between US$10-11 billion, with Joffre accounting for about half.
IPIC is owned by the government of Abu Dhabi, one of seven states in the United Arab Emirates. The company mainly invests in hydrocarbons outside Abu Dhabi and has an estimated net worth of more than US$14 billion.
IPIC's main interests in petrochemicals are a 64 percent stake in polyolefins producer Borealis AG of Vienna, Austria; a 20 percent interest in polyolefins producer Oman Polypropylene LLC of Oman; and a 9.5 percent stake in Compania Española de Petróleos SA of Madrid, Spain.