Austria’s OMV and Abu Dhabi in talks over merging chemicals businesses

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Austrian energy group OMV is in talks with Abu Dhabi National Oil Company over a deal 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 would be combined with Borouge, the chemicals company majority-owned by the UAE’s Adnoc.

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

If agreed, such a combination would amount to one of the largest deals in Europe so far this year.

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

That transaction would also mark the latest step by Adnoc, one of the world’s largest oil producers, to diversify its revenues by pushing deeper into the petrochemical sector.

German chemical company Covestro recently rebuffed a €13bn approach from Adnoc, but people familiar with the matter have said that Covestro did not rule out further engagement.

By combining Adnoc’s chemical operations with OMV, the aim is to give the UAE a stronger base for growth in the petrochemicals sector. As oil demand growth in the transport sector slows or reverses, many energy companies are betting that the market for petrochemicals — the building blocks of many products — will keep expanding.

Borealis is owned 75 per cent by OMV, and the remainder is held by Adnoc.

Meanwhile Borouge is owned 54 per cent by Adnoc and 36 per cent by Borealis, with the remainder listed in Abu Dhabi. It has a market capitalisation of about $22bn. Both companies are specialists in polyolefins, which often make up 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 is aiming for 50 per cent of its revenues to come from the sector by 2030 compared with 30 per cent today.

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

On Friday OMV said the deal would be subject to agreeing the valuation of the two businesses with Adnoc as well as approvals by regulators.

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

The group has earmarked $150bn to invest in natural gas, chemicals and clean energy, as companies transition away from relying on fossil fuels. The state-owned company is committed to expanding domestic production of crude oil, natural gas and related products, such as plastics.