Polyolefins and fertilizers major Borealis AG, Vienna, said on Feb. 3 it has received a binding offer from EuroChem Group AG, Zug, Switzerland, for the acquisition of Borealis’ nitrogen business, including fertilizer, melamine, and technical nitrogen products. The offer values the business on an enterprise value basis at €455 million (approximately $514 million at current exchange rates).
EuroChem confirmed that it has begun exclusive negotiations to acquire Borealis’ nitrogen business after submitting a binding offer.
The transaction would significantly enhance EuroChem’s nitrogen business in Europe, adding five production plants in Austria, Germany, and France, as well as adding a comprehensive sales and distribution network utilizing the Danube River.
Borealis owns three fertilizer production plants in France, and one each in Germany and Austria.
Borealis’ nitrogen business distributes about 4 million mt/y of products (including about 0.8 million mt/y of liquid technical nitrogen and about 0.15 million mt/y of melamine, according to EuroChem) in Western, Central, and Southeast Europe through the Borealis LAT distribution network. LAT has more than 50 distribution centers. Borealis said it is Europe’s leading fertilizer wholesaler.
Borealis’ fertilizer portfolio includes nitrogen, NP and NPK fertilizers, and a range of technical nitrogen products, from ammonia and ammonium nitrate to nitric acid and urea solutions. In 2020, the business posted sales of 3.9 million mt, and revenues of €908 million.
It could not be confirmed by Green Markets’ by press time, if Borealis’ share in the Rosier fertilizer production sites in The Netherlands and Belgium is excluded from the sales process with EuroChem. Borealis had said in February 2021 its share in the Rosier fertilizer production sites were not being considered at that time in any potential sales process (GM Feb. 5, 2021).
The deal remains subject to standard consultation procedures with Borealis’ employees, as well as certain closing and regulatory approvals. The transaction is expected to close in the second half of 2022.
Borealis and its majority owner, Austrian oil and gas company OMV AG, which owns a 75 percent stake in Borealis, in February 2021 announced the decision to start a process to divest the nitrogen business unit (GM Feb. 5, 2021). But even before the decision-to-sell announcement, there had been on-and-off speculation for some time that a sale of the nitrogen business was being considered.
The €455-million offer for Borealis’ nitrogen business is lower than earlier estimates for the business. When a possible sale was first explored three years ago, some estimates put the nitrogen unit’s value as high as $1 billion. But very high gas prices have weighed on the unit’s results, OMV Chairman and CEO Alfred Stern told Bloomberg News in an interview this week. “But for us, it was a clear strategic decision. We want to focus on developing out other chemicals.”
OMV took a €1.7 billion (approximately $1.92 billion at current exchange rates) writedown on its exploration and production assets, and on ADNOC refining and Borealis’ nitrogen business fertilizer business in its fourth-quarter 2021 earnings published on Feb. 3. It had warned last month about the write-down due to surging input costs during the quarter (GM Jan. 14, p. 31).
Borealis revealed in late September that it was reducing its production of ammonia in Europe amid soaring natural gas prices (GM Sept. 24, 2021). The company has ammonia plants in Austria, France, and The Netherlands.
As a privately-run company, Borealis does not disclose publicly the individual financial results of its business units.
Prior to the sale announcement in February 2021, Borealis earlier had been considering potential partnerships with fertilizer companies to increase its global reach beyond Europe (GM March 1, 2019). In an attempt to strengthen the business, the company had established a separate international Fertilizer & Melamine business unit in October 2018 (GM Sept. 28, 2018).
Borealis came under the control of OMV in late October 2020, when the Austrian oil and gas company upped its stake to 75 percent from the previous 36 percent, acquiring the additional 39 percent interest from Abu Dhabi’s sovereign wealth fund, Mubadala Investment Co., for $4.68 billion (GM Nov. 6, 2020). Mubadala retained a 25 percent interest in Borealis and also owns a 24.9 percent interest in OMV.
Following the nitrogen business divestment, Borealis will continue to focus on its core activities in polyolefins and base chemicals, thus extending OMV’s value chain towards higher value chemical products and the transformation towards a circular economy, the Austrian oil and gas company said.