$400 billion! Deal signed, marking the birth of a polyolefins giant

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$400 billion! Deal signed, marking the birth of a polyolefins giant

New Chemical Materials 2025-03-05 07:43:16

On March 4, 2025, Abu Dhabi National Oil Company (ADNOC) and OMV Aktiengesellschaft (OMV) have reached a binding framework agreement on the proposed equity merger of Borouge plc (Borouge) and Borealis AG (Borealis). Borouge plc and Borealis AG will merge into Borouge Group International (Borouge International Group), and this new entity will acquire Nova Chemicals Corporation (Nova Chemicals). The merger and acquisition are currently expected to be completed in the first quarter of 2026. This acquisition is expected to create a new global polyolefins leader with a value of over $60 billion, making Borouge Group International the world's fourth-largest polyolefins producer by nameplate capacity, with an annual capacity of 13.6 million tons across Europe, the Middle East, and North America.

Mergers and Acquisitions Details

Mergers and Acquisitions DetailsMergers and Acquisitions Details

Abu Dhabi National Oil Company (ADNOC) and Mubadala Investment Company, through its indirectly wholly-owned subsidiary Nova Chemicals Holdings GmbH, have entered into a Share Purchase Agreement (SPA) to acquire 100% of the shares in Nova Chemicals Corporation. Nova Chemical is a leading polyethylene producer in North America, with a capacity of 2.6 million tons of polyethylene and 4.2 million tons of ethylene. ADNOC and OMV, the Austrian oil and gas group, have also agreed that, following the completion of their merger, Borouge Group International will acquire Nova for $13.4 billion (including debt), further expanding its footprint in North America. We previously discussed the equity relationships among several related companies in our article "In the Middle East, a New Chemical Giant Will Rise!" as shown in the figure below:

It is expected that by the end of 2026, the re-investment in Borouge-4 will cost approximately $7.5 billion and become a key growth driver for Borouge Group International. This acquisition, coupled with the re-investment in the Borouge-4 project, will create a new global polyolefin leader valued at over $60 billion, making it the fourth largest producer globally by nominal capacity. This new industry giant will boast top-tier profitability in the sector, with an estimated annual synergy effect of about $500 million, and provide shareholders with at least a 2% increase compared to the full-year target dividend per share (DPS) for existing Borouge in 2024.

Borouge Group International plans to establish its headquarters and registration in Austria, with a regional headquarters in the UAE. It will also maintain significant corporate hubs in Calgary, Pittsburgh, and Singapore. Borouge Group International is expected to be listed on the Abu Dhabi Securities Exchange (ADX), subject to approval by the Securities and Commodities Authority (SCA) of the UAE and ADX. According to the terms of the agreement, ADNOC and OMV will each hold 46.94% of the shares in Borouge Group International, achieving joint control and equal cooperation, with the remaining 6.12% being free float shares (subject to SCA approval and assuming all existing free float shareholders of Borouge agree to exchange their current Borouge shares for Borouge Group International shares). The proposed agreement assumes that OMV will inject an initial cash amount of 1.6 billion euros into Borouge Group International to balance the equity. (This cash injection will be adjusted downward at the time of transaction completion due to adjustments in the equity value of Borouge and Borealis following anticipated dividend payments.)

Borouge Group International will integrate the complementary strengths of three leading polyolefins companies, including competitive feedstocks, differentiated and high-quality product portfolios, direct access to growth markets, world-class technology, and leading circular economy credentials. With a broad production footprint, innovation centers, and a global sales network, Borouge Group International's nominal polyolefins capacity is expected to reach approximately 13.6 million tons per year (including current organic polyolefins growth projects). At the same time, Borouge Group International will aim for leadership in circular economy solutions, building on the existing initiatives of Borealis, Borouge, and Nova, to further develop its sustainable polyolefins solutions. Borealis and Borouge have both committed to achieving net-zero emissions targets for Scope 1 and Scope 2 by 2050, and Borouge Group International's sustainability strategy and goals will be announced upon completion of the transaction.

The merger of Borouge with Borealis and the acquisition of Nova are currently expected to be completed in the first quarter of 2026, subject to regulatory approvals and other customary conditions. Upon completion of the transaction, ADNOC's stake in Borouge Group International will be transferred to XRG to complement XRG's global chemicals platform and fully support its global chemicals strategy and value creation agenda. As a strategic and value-adding investor, XRG is committed to unlocking the full value potential of Borouge Group International through these transformative transactions, including realizing synergies.

Middle East Chemicals and New Materials

Middle East Chemicals and New MaterialsMiddle East Chemicals and New Materials

The Middle East, renowned for its abundant oil and natural gas resources. However, with the changing structure of global energy demand, an increased focus on sustainability, and the potential peak in oil consumption approaching, the Middle East is embarking on a diversified transformation. It is predicted that global oil demand will reach its peak by 2030.

Rich in upstream resources and with ample financial means, Middle Eastern oil companies are vigorously expanding into midstream and downstream chemicals and new materials through acquisitions, joint ventures, and capacity expansion, increasing investment in new energy and technologies to keep pace with the direction of the energy transition. Most of their acquired midstream and downstream assets are financial investments, without deep involvement in management.

A typical example of the Middle East's oil transformation and development in chemicals and new materials is the United Arab Emirates and Saudi Arabia, with representative companies being ADNOC and SABIC under Saudi Aramco.

United Arab Emirates

United Arab EmiratesUnited Arab Emirates

The petrochemical and chemical products industry holds a significant position in the United Arab Emirates. As the third-largest producer of petrochemicals and chemical products in the Gulf Cooperation Council region, this sector has made substantial contributions to the diversification of the UAE's economy. It not only enriches the economic structure but also reduces the single dependence on energy, promoting the formation of related industrial chains and providing new impetus for economic growth and employment. Currently, the petrochemical, rubber, and plastics industries account for 22% of the UAE's manufacturing sector, becoming an important pillar. Over the next decade, the contribution of this industry to GDP is expected to increase by 75%, injecting new vitality into the UAE's economic development and driving more robust and sustainable growth.

Saudi Arabia

Saudi ArabiaSaudi Arabia

In 2016, Saudi Arabia launched the Vision 2030, which is centered on economic diversification. Since then, the domestic economy of Saudi Arabia has developed rapidly, demonstrating strong vitality and potential. To achieve the Vision 2030, one of the four critical goals explicitly proposed by Saudi Arabia is to increase the localization ratio of non-oil industries, thereby enhancing the proportion of non-oil industries in the national economy through the strengthening of local industry cultivation and technological innovation.

Over the past few decades, Saudi Arabia's chemical production capacity has maintained a rapid growth trend. Specifically, chemical production capacity steadily increased from 51 million tons in 2007 to exceed 100 million tons by 2022, with an annual growth rate of about 7%. In the chemical sector, Saudi Arabia leads globally in basic and intermediate chemicals, and its plastic production capacity ranks second in the Middle East and North Africa region, demonstrating a strong regional influence. However, it remains relatively weak in specialty chemicals and rubber products, leaving significant room for development.

The chemical industry plays a crucial role in the economic diversification of Saudi Arabia, accounting for half of the added value of the manufacturing sector. To further enhance the competitiveness of the chemical industry, Saudi Arabia has set clear objectives in its industrial development and logistics plan: first, to increase the localization rate of the supply chain for basic and intermediate chemicals to 70%, reducing external dependence and enhancing industrial autonomy; second, to vigorously develop the manufacturing of specialty chemicals, improving their quality and market share through technological innovation and industrial upgrading; and third, to double the domestic production capacity of quantity and packaging products to meet the growing market demand.

The chemical industry plays a pivotal role in the diversification of Saudi Arabia's economy, already accounting for half of the added value in the manufacturing sector. To further enhance the competitiveness of the chemical industry, Saudi Arabia has set clear goals in its industrial development and logistics plan: First, to increase the localization rate of basic and intermediate chemical supply chains to 70%, thereby reducing external dependence and strengthening industrial autonomy; second, to vigorously develop the production of specialty chemicals, improving their quality and market share through technological innovation and industrial upgrading; third, to double the domestic capacity for quantity and packaging products, in order to meet the growing market demand.

In its industrial development strategy, Saudi Arabia places great emphasis on the development of specialty chemicals and rubber and plastic products, identifying 20 types of specialty chemicals as key areas for future development, and explicitly stating that by 2030, the production capacity of specialty chemicals will achieve a significant 10% growth, with an annual capacity reaching 8.7 million tons, 80% of which will be used to meet domestic consumption needs, and 20% for export, expanding into international markets. At the same time, Saudi Arabia has also identified three categories and 20 types of rubber and plastic products as key directions for future development, and plans to reach an ambitious goal of 11.5 million tons of rubber and plastic production capacity by 2035, a substantial increase of 8.75 million tons from the existing level in 2020, injecting new strong momentum into Saudi Arabia's industrial development and economic diversification.

ADNOC

ADNOCADNOC

ADNOC aims to create a global company that can rank among the top five in the global chemical industry.

In November 2022, the ADNOC board's annual meeting announced that the capital expenditure over the next five years would reach $150 billion, with a major push for acquiring overseas assets.

In October 2024, Abu Dhabi National Oil Company (ADNOC) reached an agreement with German chemical giant Covestro on acquisition. Covestro is the world's largest producer of polycarbonate, and its capacities for MDI, TDI, HDI, and IPDI rank among the top three globally.

In December 2024, Abu Dhabi National Oil Company (ADNOC) announced the establishment of a new low-carbon energy and chemicals investment company, XRG, valued at over $80 billion, with plans to start operations in the first quarter of 2025. The goal of XRG is to double the value of its assets within ten years by investing in three major areas: natural gas, chemicals, and low-carbon energy.

Saudi Aramco and SABIC

Saudi Aramco and SABICSaudi Aramco and SABIC

Saudi Aramco is mainly engaged in the exploration, development, production, refining, transportation, and sales of oil. According to the Fortune Global 500 list, Saudi Aramco's revenue in 2023 reached approximately $603.651 billion, ranking second globally, just behind Walmart. At the same time, Saudi Aramco's profit in 2023 reached about $159 billion, making it the most profitable company in the world. After its listing on December 11, 2019, Saudi Aramco entered a phase of aggressive external acquisitions. The year after the listing, Saudi Aramco completed the acquisition of 70% equity in Saudi Basic Industries Corporation (SABIC) for $69.1 billion in cash, to enhance its refining and chemical capabilities.

In September 1976, SABIC was established by royal decree with the aim of using crude oil to produce value-added products (chemicals, fertilizers, and polymers) for export, with the goal of establishing the Kingdom of Saudi Arabia's position in the chemical industry and attracting international oil companies to invest in joint ventures in Saudi Arabia.

In 2002, SABIC acquired DSM Group's petrochemical business in Europe, strengthening SABIC's position in the European market and further expanding its business areas and market space. In 2006, SABIC acquired Huntsman Petrochemicals (UK) and renamed it SABIC (UK) Petrochemicals. In 2007, SABIC acquired GE Plastics and established the "Specialty Materials Strategic Business Unit." This acquisition opened up new avenues for SABIC to develop advanced materials, enabling it to provide higher value-added products to customers and enhancing SABIC's market position in the specialty materials sector. Meanwhile, SABIC has established numerous joint ventures with internationally renowned chemical companies such as ExxonMobil, Japan SPDC, and Chevron Phillips. These joint ventures cover multiple areas including ethylene production and polymer manufacturing, promoting SABIC's rapid development in the global chemical market through technology sharing and market collaboration.

In 2002, SABIC acquired DSM Group's petrochemical business in Europe, enhancing SABIC's position in the European market and further expanding its business scope and market space. In 2006, SABIC acquired Huntsman Petrochemicals (UK) and renamed it SABIC (UK) Petrochemicals. In 2007, SABIC acquired GE Plastics and established the "Specialty Materials Strategic Business Unit." This acquisition paved a new path for SABIC to develop advanced materials, enabling it to offer higher value-added products to customers and strengthening its market position in the specialty materials sector. Meanwhile, SABIC has established numerous joint ventures with internationally renowned chemical companies such as ExxonMobil, Japan SPDC, and Chevron Phillips. These joint ventures cover areas such as ethylene production and polymer manufacturing, promoting SABIC's rapid development in the global chemical market through technology sharing and market collaboration.

Currently, SABIC has grown into the largest chemical producer in Saudi Arabia, the world's largest producer of monoethylene glycol and methanol, the world's largest producer of polyphenylene ether, the second-largest producer of polycarbonate, and one of the top eight producers of polyethylene and polypropylene globally.

In recent years, Saudi Aramco has been increasing its investment in China. In 2023, Saudi Aramco's investment in China exceeded 100 billion RMB. In March 2023, Saudi Aramco, together with Huajin Group and Panjin Xincheng Group, invested 83.7 billion RMB to start the construction of the Huajin Aramco Fine Chemicals and Raw Materials Project, which includes 32 process units with an annual capacity of 15 million tons of refining and 1.65 million tons of ethylene. The project is expected to be completed by September 2025. In April 2023, the preliminary work on the Sino-Saudi Gulei Ethylene Project, jointly invested by SABIC, Fujian Energy & Petrochemical Group, and Zhangzhou Jiulongjiang Group, commenced. The project will include a world-class scale ethylene plant with an annual capacity of 1.5 million tons, along with downstream deep processing facilities, with a total investment of 42.07 billion RMB. In September 2023, the 260,000 tons/year Polycarbonate (PC) project of Sino-Saudi (Tianjin) Petrochemical started commercial operations in Tianjin Nangang Industrial Zone. In terms of equity transactions, Saudi Aramco acquired a 10% stake in Rongsheng Petrochemical for a total transaction amount of 24.605 billion RMB; and a 10% strategic equity in Jiangsu Shenghong Petrochemical Group Co., Ltd., a wholly-owned subsidiary of Oriental Shenghong.

In recent years, Saudi Aramco has continuously increased its investment in China. In 2023, Saudi Aramco's investment in China exceeded 100 billion RMB. In March 2023, the construction of the Huajin Aramco Petrochemical and Raw Materials Project, jointly funded by Saudi Aramco, Huajin Group, and Panjin Xincheng Group with an investment of 83.7 billion RMB, officially commenced. The project will build a total of 32 process units, including a 15 million tons/year refinery and a 1.65 million tons/year ethylene plant, and is expected to be completed in September 2025. In April 2023, the preliminary work for the Sino-Saudi Gulei Ethylene Project, a joint venture between SABIC, Fujian Energy and Petrochemical Group, and Zhangzhou Jiulongjiang Group, began. The construction includes a world-class scale 1.5 million tons/year ethylene unit and downstream deep processing facilities, with a total investment of 42.07 billion RMB. In September 2023, the 260,000 tons/year polycarbonate (PC) project of Sino-Saudi (Tianjin) Petrochemical Company was put into commercial operation in the Nangang Industrial Zone of Tianjin. In terms of equity transactions, Saudi Aramco acquired a 10% stake in Rongsheng Petrochemical for a total transaction value of 24.605 billion RMB; and a 10% strategic equity in Jiangsu Shenghong Petrochemical Group Co., Ltd., a wholly-owned subsidiary of Oriental Shenghong.

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$400 billion! Deal signed, marking the birth of a polyolefins giant

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