OCI NV and UAE state-owned oil giant Abu Dhabi National Oil Co. (ADNOC) on Dec. 15 announced that they have entered into a binding sale and purchase agreement for ADNOC to acquire OCI’s 50% + 1 share stake in Abu Dhabi-based Fertiglobe Plc for a total consideration of $3.62 billion.
Following the completion of the transaction, OCI will have fully exited the Fertiglobe joint venture while ADNOC’s shareholding in the jv will increase to 86.2%. The free float traded on the Abu Dhabi Securities Exchange will remain at 13.8%. The transaction is expect to close in 2024, subject to regulatory conditions and antitrust approvals.
OCI said the purchase price paid of AED3.20 per share represents an 8% premium on Fertiglobe’s closing price as of Dec. 11, 2023, and a 25% premium on the price at the jv’s $795 million initial public offering (IPO) in 2021(GM Oct. 22, 2021).
The purchase consideration additionally includes a two-year earn-out mechanism for FY2024 and FY2025 linked to free cash flow metrics and commodity pricing that may allow OCI to participate in future nitrogen market upside. OCI said it will seek shareholder approval for the transaction at an extraordinary general meeting to be convened in due course.
The announcement follows media speculation and reports this past week that ADNOC was exploring a potential takeover of Amsterdam-based OCI NV as part of the latest push by the oil major to expand beyond oil.
According to a Dec. 14 Bloomberg report, citing unnamed sources familiar with the matter, the parties were working with advisors and had held preliminary talks about a possible transaction. Some of the unnamed sources cited by the report believed ADNOC could also opt to acquire significant assets from OCI instead of acquiring the entire company.
OCI, backed by Egyptian billionaire Nassef Sawiris, has been evaluating a range of options, including asset disposals, as part of a strategic review.
OCI and ADNOC established the Fertiglobe jv in 2019, combining ADNOC’s fertilizer business into OCI’s Middle East and North Africa nitrogen fertilizer platform (GM Oct.4, 2019). Following the subsequent IPO on ADX, OCI’s shareholding was reduced to half of the jv company’s shares, down from the original 58% stake, while ADNOC’s stake dropped to 36.2% from the original 42% holding.
Fertiglobe is the largest export-focused nitrogen fertilizer platform globally and the largest producer in the MENA region, with a production capacity of 5 million mt/y of urea and 1.5 million mt/y of merchant ammonia. The jv is comprised of OCI’s companies in Egypt, EBIC and EFC, and its Algeria-based Sorfert company, and ADNOC’s Fertil fertilizer production facilities in Ruwais, UAE.
ADNOC said the Fertiglobe transaction supports its “ambitious chemical strategy and its plans to establish a global growth platform for ammonia, a key lower carbon fuel and hydrogen carrier that is expected to play an important role in the energy transition.”
For Fertiglobe, this transaction supports the company’s future growth plans, “enabling it to accelerate the pursuit of new market and product opportunities and expand its focus on clean ammonia as an emerging fuel and hydrogen carrier.”
Additionally,
OCI and ADNOC on Dec. 15 announced a roadmap to explore opportunities for
global strategic collaboration on future joint investments, including
development projects outside of the Middle East in decarbonization and product
distribution across North America and Europe, according to the OCI statement.
In its statement, ADNOC reported the two companies had also signed a Memorandum
of Understanding to explore opportunities to cooperate on projects in the US,
on ammonia imports into Europe, and on broader development of the low-carbon
ammonia market.
Separately, according to a Bloomberg report earlier this week, OCI is also working with advisors to gauge buyer interest in its Wever, Iowa-based Iowa Fertilizer Co. (IFCo) and is seeking more than $3 billion for the business. IFCo has 195,000 mt/y of sellable anhydrous ammonia capacity, and production capacity for 1.5 million mt/y of UAN, 420,000 mt/y of urea, and 315,000 mt/y of diesel exhaust fluid (DEF).
OCI’s shares have taken a 38% dive in Amsterdam trading this year, giving the company as a whole a market value of about €4.4 billion (about $4.8 billion), according to Bloomberg.
Commenting on the media reports, OCI in a Dec. 14 statement said it continually considers strategic initiatives regarding its portfolio, including potential divestments, and previously has disclosed its ongoing strategic review. Within this context, the company confirmed that discussions with multiple potential buyers for certain of its nitrogen assets are ongoing.
OCI reported in its third-quarter earnings release in November (GM Nov. 10, p. 27) that it had hired financial advisors to explore asset monetization opportunities and was engaged in “active discussions” with a focus on “attractive value propositions.”
OCI also reported in November that its strategic review, which has focused on the identification of value accretive monetization opportunities while prioritizing growth in its fast-growing clean fuels business, was nearing completion.
The strategic review, announced in March, followed a request by one of its largest shareholders, activist investor Jeff Ubben of Inclusive Capital Partners, which owns 5% of OCI. Ubben urged OCI to explore strategic options, including asset sales, especially for its IFCo unit, amid shareholder concerns about the company’s stock prices.
OCI reported adjusted third-quarter EBITDA of $242 million, a 75% decline from the year-ago $961.8 million and a big miss on the average analyst estimate of $360.3 million (Bloomberg Consensus). Some 82% of OCI’s third-quarter adjusted EBITDA was generated by Fertiglobe, as noted by Morgan Stanley analyst Lisa De Neve in a Bloomberg report.
Third-quarter revenue was off 54% from the prior year, with the company citing much lower selling prices across both nitrogen and methanol segments, and a front-loaded order book. OCI posted an adjusted net loss of $95.2 million for the quarter versus a net profit of $257.1 million for the same prior-year quarter.
In addition to IFCo, OCI also has nitrogen fertilizer and methanol production assets in The Netherlands, including 1.1 million mt/y of ammonia and 0.73 million mt/y of UAN capacity, according to the Green Markets database. OCI also has ammonia and methanol production facilities in Beaumont, Texas, with 0.3 million mt/y of ammonia capacity.
The company is also developing a 1.1 million mt/y blue ammonia production facility at Beaumont, which is on track to start production in early 2025. OCI reported in November that discussions were underway for long-term product offtakes and potential equity participation.
In 2022, OCI sold some 8.63 million mt of ammonia and nitrogen fertilizers as well as 1.26 million mt of methanol, 917,200 mt of DEF, and 84,000 mt of melamine. In addition, the company sold 3.6 million mt of traded third-party nitrogen products, including ammonia, urea, UAN, and ammonium sulfate.
Separately, ADNOC is close to finalizing a deal with Austrian oil and gas group OMV AG to create a petrochemicals company worth more than €30 billion (approximately $32.4 billion at current exchange rates), according to Bloomberg. The Abu Dhabi oil giant is also working on a potential acquisition of German chemicals company Covestro AG for €11.6 billion (GM Sept. 15, p. 26; Aug. 18, p. 29).