Reuters, citing “people familiar with the matter,” reports that Chevron Phillips Chemical (CPChem; The Woodlands, Texas) has bid over $15 billion including debt to acquire Nova Chemicals (Calgary, Alberta). The bid values Nova at 10 times its 2018 Ebitda, according to Jonas Oxgaard, analyst with Bernstein.
CPChem, a 50-50 joint venture between Philips 66 and Chevron, declined to comment on the report. “We recently completed our US Gulf Coast Petrochemical Project and have publicly stated that we are exploring additional projects that would enhance enterprise value,” says a statement from the company. “Due to these ongoing exploration activities, it is inevitable that rumors and speculation will surface from time to time.”
A combination would make CPChem the largest producer of ethylene in North America, up from third behind Dow and ExxonMobil. Nova has ethylene capacity of 3.8 million metric tons (MMt)/year of ethylene; CP Chem has ethylene capacity in North America of 5.3 million MMt/year, according to IHS Markit estimates.
“Conceptually, this bid is not surprising,” Oxgaard says. “The oil majors are all going into petrochemicals in a big way, and with assets trading below replacement value, buy should be favored over build.”
Nova is owned by Mubadala Investment Company, an Abu Dhabi government-owned firm established in 2017 by the merger of Mubadala Development Company and IPIC. Other petrochemical producers in Mubadala’s portfolio include Borealis, OMV, and CEPSA.
CPChem’s sales in 2018 totaled $11.3 billion with net income of $2.1 billion.
By Clay Boswell
Source: Chemical Week
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