WOOD Flash – OMV/Borouge: ADNOC and OMV may combine their petrochemicals businesses
OMV and ADNOC have announced that they are pursuing a possible merger of their petrochemicals businesses, Borouge and Borealis. Borealis is a European-headquartered company that is 75% owned by OMV and 25% by ADNOC. Borouge is an Abu Dhabi based company that is 54% owned by ADNOC and 36% by Borealis, with the remainder listed on the Abu Dhabi Securities Exchange (ADX). As both companies are ultimately owned by OMV and ADNOC, there is a strong logic to them merging and thus reducing managerial complications. A combined group could make sector acquisitions simpler. Growth in petrochemicals is part of the strategic goals of both partners, so this may be a further reason for any tie up. How the partners will value their stakes in these businesses is not clear. Borouge has a market cap of USD 21.5bn and Borealis an implied value of USD 12bn, based on the acquisition prices in 2020. The Borouge public offering happened in 2022 and we do not believe that the current market cap was the basis for valuations when OMV increased its Borealis stake. Therefore, we would expect to see Borealis valued at more than the implied acquisition value from 2020.
OMV is an international energy company with activities in Exploration and Production (E&P), Refining and Marketing including petrochemicals (R&M), and Gas and Power (G&P). Co. explores and develops oil and gas resources and supply energy to over 100 million people. OMV has three operating segments: Exploration and Production (E&P), Refining and Marketing, including petrochemicals (R&M), and Gas and Power (G&P), as well as the segment Corporate and Other (Co&O).
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