Austria’s OMV and Abu Dhabi in talks to merge chemicals businesses

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Austrian energy conglomerate OMV is negotiating a deal with Abu Dhabi National Oil Company that could combine their chemical divisions as part of an ambitious plan to create a global force in petrochemicals.

Under the deal, OMV’s chemicals arm Borealis will be combined with Borough, a chemicals company majority-owned by Adnoc of the United Arab Emirates.

Each party holds a stake in the other but under an announced framework OMV said it would aim to “be equal partners under a jointly controlled, listed platform for potential growth acquisitions”.

If agreed, such a combination would be one of the biggest deals in Europe so far this year.

“This potential transaction would have a strong and compelling industrial argument,” Alfred Stern, chief executive and chairman of OMV, said on Friday.

The transaction will also mark the latest move by Adnoc, one of the world’s largest oil producers, to diversify its revenues by venturing deeper into the petrochemical sector.

German chemical company Covestro recently rejected Adnoc’s €13 billion offer, but people familiar with the matter said Covestro has not ruled out further involvement.

By combining Adnoc’s chemical operations with OMV, it aims to give the UAE a strong foundation for growth in the petrochemical sector. As oil demand growth slows or reverses in the transportation sector, many energy companies are betting that the market for petrochemicals — the building block of many products — will continue to expand.

OMV owns 75 percent of Borealis, and the rest is owned by Adnoc.

Meanwhile, Borouge is owned 54 per cent by Adnoc and 36 per cent by Borealis, with the remainder listed in Abu Dhabi. Its market capitalization is approximately $22 billion. Both companies specialize in polyolefins, which often make plastics and other products.

OMV’s Stern told the Financial Times this month that chemicals are the “growth engine” of its strategy and that it aims for 50 percent of its revenue to come from this sector by 2030, up from 30 percent today.

However, he added that he was not planning to sell shares in Borealis.

On Friday, OMV said the deal would be subject to approval from regulators as well as an agreement on a valuation of the two businesses with Adnoc.

Adnoc, under the leadership of Sultan Al-Jaber, who is also in charge of hosting the COP28 climate summit in the UAE, has sought to maximize the value of the Gulf state’s resources by expanding downstream production.

The group has set aside $150 billion for investments in natural gas, chemicals and clean energy, as companies move away from reliance on fossil fuels. The state-owned company is committed to expanding domestic production of related products such as crude oil, natural gas and plastics.