Financial Times: Ineos emerges from shadows with Innovene buy from BP: “In May, Royal Dutch Shell and BASF sold their plastics joint venture, Basell, for €4.4bn to a consortium led by Access Industries of the US and India's Chatterjee Group.”: Saturday 8 October 2005
By Thomas Catan and Lina Saigol
Published: October 8 2005
When BP announced the $9bn (£5bn) sale of its petrochemicals and refining arm Innovene to Ineos, the response from many investors was: who?
Many analysts covering the oil sector had never heard of the privately held company, which, with this deal, is set to become the fourth-largest petrochemicals manufacturer in the world. Only Dow, DuPont and BASF will be larger.
Ineos is a global manufacturer of speciality and intermediate chemicals and polymers, making the raw materials used in products from anti-freeze to plastic bags.
Its acquisition, as part of the deal, of two refineries in the UK and France will also make it one of the top 10 European oil refiners, according to Neil Mitchell, of Wood Mackenzie, the oil consultancy.
The Grangemouth and Lavéra refineries will give Ineos 412,000 barrels of crude refining capacity a day at a time when refining margins are extremely attractive.
Ineos was formed in 1998 and got its start through a management buy-out of a BP facility in Antwerp. Since then, it has grown quickly, acquiring and turning around businesses that competitors - such as ICI and Dow Chemical - do not regard as strategic.
The company, which has achieved an 83 per cent compound annual sales growth rate over the past five years, was this week named a winner of the Best of European Business Awards, run by the Financial Times and Roland Berger Strategy consultants.
Ineos has 46 manufacturing facilities in 14 countries. Last year, it employed around 7,500 people and had sales of more than $8bn.
Merrill Lynch, Morgan Stanley and Barclays Capital have put together the financing package for its latest and largest deal, understood to be for €9.9bn (£6.8bn). Standard and Poor's, the ratings agency, downgraded the company's long-term debt rating by one notch to BB-.
The deal could also be seen as a success for BP, which started the week badly following the announcement that hurricanes Katrina and Rita had blown a $700m hole in its profit. The world'ssecond-largest oil company got about $1bn more than analysts had expected and, in the process, rid itself of a business that has low returns by its standards.
"I think it's an extremely good deal for BP and the money will find its way back to shareholders," says Bruce Evers, an analyst at Investec Securities. BP said this week that it had already bought back shares from investors worth $3.7bn this quarter.
The sale comes at a time when some of the world's largest oil and gas companies are divesting themselves of their petrochemicals businesses. In May, Royal Dutch Shell and BASF sold their plastics joint venture, Basell, for €4.4bn to a consortium led by Access Industries of the US and India's Chatterjee Group.
One month later, Statoil, the state-controlled Norwegian oil and gas company, sold its 50 per cent stake in Borealis, the polyolefins plastic manufacturer based in Copenhagen, for €1bn.
The stake was sold toAbu Dhabi's International Petroleum InvestmentCompany (IPIC) and OMV, the Austrian oil company, both of which were already shareholders in Borealis. IPIC is also a substantial shareholder in OMV.
And Total, the French oil group, is carving out the chlorochemicals, intermediates and performance product assets of Atofina, the petrochemicals business formed by the merger in 2000 of TotalFina and Elf Aquitaine. Only ExxonMobil, seen as highly competent in the sector, has resisted the trend.
Reliance Industries, the Indian chemicals group, is understood to have been another interested bidder in Innovene. Both Reliance and Ineos were failed bidders in the auction of Basell.
Additional reporting by Ivar Simensen and David FirnBest of European Business www.ft.com/beb
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