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(Bloomberg) -- The United Arab Emirates’ and Austria’s top oil companies agreed on terms to create a chemicals giant worth more than $60 billion, enhancing their positions in an industry they expect will continue to grow in the energy transition.
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Abu Dhabi National Oil Co. and OMV AG will merge their units Borealis AG with Abu Dhabi-listed Borouge Plc, capping almost two years of negotiations. The deal, one of the biggest globally in the past few years, will also include the joint purchase of Nova Chemicals from Abu Dhabi sovereign fund Mubadala Investment Co. for $13.4 billion, including debt, Adnoc said in a statement.
The agreement is Adnoc’s latest big-ticket push into chemicals after it agreed to buy Germany’s Covestro AG last year for nearly $13 billion, the largest Middle Eastern acquisition of a European firm at the time. While owning a slice of the industry would ensure ready customers for Adnoc’s crude and natural gas, the company also sees demand for chemical products such as plastics continuing to expand even as climate change risks slow the growth of other fuels such as gasoline.
“We will create a new industry powerhouse,” Adnoc Chief Executive Officer Sultan Al Jaber said in the statement. With the new business, the partners will “seek to meet the growing global demand for chemicals, while driving value creation.”
Bloomberg first reported in July 2023 that Austria-based OMV and Abu Dhabi’s Adnoc were in talks about merging the units. But wrangling over cash contributions and where the company would be based had stalled an agreement.
Meanwhile, political inertia in Austria added to the uncertainty, with the government in Vienna reluctant to sign off on a major transaction before federal elections. Christian Stocker was sworn in as chancellor on Monday after five months of coalition negotiations.
‘Strategic Move’
The deal was welcomed by Austria’s state-asset agency OeBAG, which holds two seats on OMV’s supervisory board as the manager of the state’s 31.5% shareholding. The merger is “very good news for Austria’s economy,” said OeBAG Managing Director Edith Hlawati.
“This is a strategic move that positions us as a truly global polyolefin powerhouse,” OMV CEO Alfred Stern said. The merger gives the company access to cheaper feedstock and higher growth markets while reducing OMV’s emissions footprint, he said.