Polish fertilizers and chemicals group Grupa Azoty SA will start talks with Polish energy group Orlen SA aimed at ending the potential takeover of Azoty subsidiary Zakłady Azotowe Puławy, Azoty said in a Nov. 20 statement. Azoty said its management board adopted the resolution to enter talks with Orlen on Nov. 20.
However, Orlen’s President of the Management Board and CEO Daniel Obajtek, writing on X (formerly Twitter), said Orlen “maintains its readiness” to take over the Puławy unit, and “the decision of the management board of Grupa Azoty to suspend the sale of the subsidiary does not serve the purpose of stabilizing the group’s financial position or the fertilizer market.”
Both Azoty and Orlen are state controlled, and there has been speculation that the Puławy acquisition move was government-driven, aimed at helping the ailing fertilizer and chemical producer.
In its statement, Azoty said its decision not to sell Puławy was “influenced by several factors,” including the conclusion of an analysis conducted by an external consulting firm of the potential transaction’s impact on its value creation capacities.
The fertilizer and chemicals group continues to seek ways to rebuild its market value and optimize its businesses, Grupa Azoty Vice President of the Management Board and Deputy CEO Marek Wadowski said in the company statement.
Azoty and Orlen signed a cooperation and non-disclosure agreement on Orlen’s potential acquisition of Puławy in early June (GM June 9, p. 1). The agreement came as Azoty attempted to improve its financial position after warning that it would breach debt covenants at the end of the second quarter (GM May 26, p. 26; May 19, p. 5). The company posted a 2Q net loss of Pln543 million, or approximately $125 million at then current exchange rates.
Azoty was able to secure a waiver of certain covenants and amendments to its group loan agreements and those of its Zakłady Chemiczne “Police” SA subsidiary with 13 financing institutions in early September (GM Sept. 8, p. 26).
The group said in this week’s market filing that it is continuing discussions with financial institutions. The group posted a third-quarter negative EBITDA of Pln348 million but highlighted an uptick in its Agro/Fertilizers business segment amid improving domestic fertilizer demand.
Obajtek in late September reiterated Orlen’s interest in acquiring the Puławy subsidiary and said an economic analysis of the potential acquisition was ongoing (GM Sept. 29, p. 27). Obajtek said the analysis was expected to be completed by the end of this year.
Puławy’s production capacity includes 1.24 million mt/y of ammonia, 1.19 million mt/y of urea, and 1.2 million mt/y of UAN, according to the Green Markets database. In addition, the subsidiary in 2020 commissioned a new AN/CAN fertilizer plant with total production capacity of up to 820,000 mt/y (GM July 10, 2020). One production line is for granulated AN with 1,200 mt/d capacity, while the second is for CAN-27 production at 1,400 mt/d.