Nova Chemicals to be bought by Abu Dhabi firm
Struggling plastics supplier will get much-need influx of cash from Middle East
By Dave Hannon -- Purchasing, 2/23/2009 12:10:00 PM
Nova Chemicals has agreed to a takeover offer from International Petroleum Investment Company (IPIC), a state-owned investment firm based in United Arab Emirate state of Abu Dhabi.
Canadian firm Nova is a supplier of building blocks for the petrochemical industry such as ethylene and styrene. Its Joffre petrochemical complex in central Alberta is one of the world's largest and seen as strategically key due to a low-cost supply of ethane, a building block for ethylene and polyethylene. But the company lost $214 million in the fourth quarter as sales of its resins dropped on slumping demand. In its fourth quarter earnings report, the company said: "As crude oil and intermediate products dropped dramatically in the fourth quarter of 2008, the selling prices of Nova Chemicals’ finished products also dropped. Since the company had higher-cost third quarter inventory flowing through the income statement in the fourth quarter of 2008, we incurred losses of $364 million before-tax ($294 million after-tax). In addition we wrote down the value of our year-end inventory by $129 million before-tax ($90 million after-tax) to reflect market prices as of Dec. 31, 2008."
In November, Nova temporarily shut down its Beaver Valley plant in Monaca, Pa., which produces styrenic polymers for building and construction, durable goods and automotive markets.
Officials said the total value of the deal including assumption of Nova Chemicals’ net debt obligations, is approximately $2.3 billion, which includes a $250 million credit deal to provide Nova liquidity.
“The opportunity to join IPIC comes at a good time for Nova Chemicals and will enable us to offer both stability and long-term growth to many of our stakeholders,” said Jeff Lipton, Nova Chemicals’ CEO, in a statement. “IPIC is well financed and has a track record of working successfully with companies like ours.”
The Nova-IPS deal is the latest in a continuing string of deals under which Middle Eastern firms bring much-needed cash to struggling North American petrochemicals suppliers (see Energy prices accelerate the move to the Middle East).Dow Chemical was near a major joint-venture deal with a Kuwaiti-owned firm until the Kuwaiti government pulled out in late December. HB Fuller last year expanded its presence in the Middle East.
See also: Buyers follow pipeline back to the Middle East
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