Polyolefins and fertilizers major Borealis AG, Vienna, said on March 10 it has decided to decline the binding offer it received from EuroChem Group AG on Feb. 2 for the acquisition of Borealis’ nitrogen business. The two had been in exclusive negotiations (GM Feb. 4, p. 1).
“We have closely assessed the most recent developments around the war in the Ukraine and sanctions that have been put in place,” Borealis’ CEO Thomas Gangl said. “As a consequence, we have decided to decline EuroChem’s offer for the acquisition of Borealis’ nitrogen business, including fertilizer, melamine, and technical nitrogen products.”
Borealis said it will now consider various options regarding the future of its nitrogen business.
The EuroChem offer valued the Borealis Nitrogen business on an enterprise value basis at €455 million (approximately $500 million at current exchange rates).
That Borealis and its parent company, Austrian oil and gas company OMV AG, which owns a 75 percent stake in Borealis, would pull the plug on negotiations with EuroChem had been anticipated after Russia invaded Ukraine.
Zug, Switzerland-based EuroChem until March 10 was controlled by Russian billionaire Andrey Melnichenko, who was put on the E.U. sanctions list on March 9 (see story, page one).
There also had been doubts whether Austrian regulatory approval for any deal with EuroChem would be secured in the light of sanctions against Russia (GM March 4, p. 29).
Borealis said on March 11 it is re-evaluating its business transactions with Russia in compliance with all applicable laws, including, where relevant, U.S., U.K., and E.U. sanctions.
“For the time being, we have decided to stop sales to Russia and Belarus. Sales volumes are being redirected to Western Europe,” the company said.
“We are implementing measures required to ensure the stability in procurement of materials for Borealis’ production sites. We are phasing out sourcing from Russia and Belarus, shifting to sources from the West.”
Last weekend, Austrian oil and gas company OMV AG, which owns a 75 percent controlling stake in Borealis, had said in light of the latest developments in Ukraine, it is re-evaluating its engagement in Russia.
“While Russia has been one of the core regions in OMV’s Exploration & Production portfolio, the Executive Board has taken the decision not to pursue any future investments in Russia,” the company said on March 5.
OMV already has ended all negotiations with Russian state-owned gas company Gazprom PJSC about the potential purchase of a 24.98 percent stake in blocks 4A/5A of the Achimov-Formation in Russia’s Urengoy gas and condensate field (GM March 4, p. 29). It said it is now initiating strategic review of its 24.99 percent interest in Yuzhno Russkoye and all options, including possibilities to divest or exit.
OMV is also reviewing its involvement in the Nord Stream 2 pipeline, which is 50 percent owned by Gazprom. The pipeline, which runs under the Baltic Sea from Russia to Germany and would handle Russian gas, was completed last September, but has not secured an operating licence. Following Russia’s invasion of Ukraine, Germany suspended its certification of the pipeline (GM Feb. 25, p. 1).
OMV said it takes its responsibility to supply Europe and Austria with natural gas “seriously.”
“Households, institutions, and the industrial sector rely on dependable gas supplies, including gas from Russia, which is supplied under longstanding contracts,” the company said, adding that it is working to identify and develop additional sources of supply.