UK’s BP has agreed to sell its global petrochemicals business to chemical giant INEOS for $5 billion as part of its strategic step to reinvent itself under new CEO Bernard Looney.
UK’s BP has agreed to sell its global petrochemicals business to chemical giant INEOS for $5 billion as part of its strategic step to reinvent itself under new CEO Bernard Looney.
BP said in a statement that the deal would strengthen its balance sheet and delivers its target for agreed divestments a year earlier than originally scheduled.
Under the terms of the agreement, INEOS will pay bp a deposit of $400 million and will pay a further $3.6 billion on completion. An additional $1 billion will be deferred and paid in three separate instalments of $100 million in March, April and May 2021 with the remaining $700 million payable by the end of June 2021. Subject to regulatory and other approvals, the transaction is expected to complete by the end of 2020.
BP’s petrochemicals business is focused on two main businesses – aromatics and acetyls – each of which has leading technology and advantaged manufacturing plants, including a strong presence in growth markets in Asia. In total, the businesses have interests in 14 manufacturing plants in Asia, Europe and the U.S. and in 2019 produced 9.7 million tonnes of petrochemicals.
Bernard Looney, BP chief executive officer said: “This is another significant step as we steadily work to reinvent BP. These businesses are leaders in their sectors, with world-class technologies, plants and people. In recent years they have improved performance to produce highly competitive returns and now have the potential for growth and expansion into the circular economy.
“I am very grateful to our petrochemicals team for what they have achieved over the years and their commitment to BP. I recognise this decision will come as a surprise and we will do our best to minimise uncertainty. I am confident however that the businesses will thrive as part of INEOS, a global leader in petrochemicals.
“Strategically, the overlap with the rest of BP is limited and it would take considerable capital for us to grow these businesses. As we work to build a more focused, more integrated BP, we have other opportunities that are more aligned with our future direction. Today’s agreement is another deliberate step in building a BP that can compete and succeed through the energy transition.”
INEOS is a leading global chemicals company with a network spanning over 180 sites in 26 countries, employing some 22,000 staff worldwide. Over the past two decades, INEOS has acquired a number of businesses from BP, most notably the 2005 $9 billion purchase of Innovene, the bp subsidiary that comprised the majority of bp’s then chemicals assets and two refineries.
Brian Gilvary, BP’s chief financial officer, said: “With today’s announcement we have met our $15 billion target for agreed divestments a full year ahead of schedule, demonstrating the range and quality of options available to us.”
Gilvary, who led the negotiation with the owners of INEOS, added: “BP has had a long relationship with INEOS and this agreement reflects the mutual respect and trust that exists between us. It is a strategic deal for both parties that recognises both the high quality of the businesses and that INEOS is in many ways a natural owner for them.”
In total, the businesses included in the transaction currently employ over 1,700 staff worldwide. These staff are expected to transfer to INEOS on completion of the sale.
BP expects to report its second quarter 2020 results on 4 August and to hold a capital markets day to set out details of its new strategic direction in mid-September.
Source: Pipeline ME
