Abu dhabi: ADNOC and OMV Aktiengesellschaft ('OMV') have announced significant progress towards establishing Borouge Group International AG. This includes signing an Asset Usage Agreement for the Borouge 4 production complex.
According to Emirates News Agency, the formation of Borouge Group International AG, resulting from the merger of Borouge Plc and Borealis, and the acquisition of Nova Chemicals, is on track. The transactions are expected to close by March 2026, pending customary conditions. The Borouge 4 (B4) complex, a new integrated polyolefins production facility, features a 1.5 million tonnes ethane cracker and 1.4 million tonnes of polyethylene capacity. The first plant is slated to start operations this quarter. Equipped with advanced Borstar® technology, B4 is primarily owned by ADNOC (70%) and OMV (30%), and is part of what is set to be the world's largest single-site polyolefins complex.
The Asset Usage Agreement permits Borouge Plc, and eventually Borouge Group International AG, to manage and market B4's production in exchange for an at-cost asset utilization fee. This arrangement is anticipated to deliver an estimated USD 400 million in cumulative net profit over three years, equating to nearly 10% annual earnings accretion for Borouge Plc post ramp-up. The Agreement will likely continue until Borouge Group International AG acquires the asset, which is not expected before 2029, thus allowing flexibility on future capital investments.
Operations at B4 are forecasted to incrementally increase throughout 2026. With this Agreement, Borouge Group International AG will access 13.6 million tonnes of production capacity across Europe, the Middle East, and North America, positioning it as the fourth-largest polyolefins producer globally. The combined entity is projected to maintain a strong margin profile and generate substantial synergies.
Borouge Group International AG is expected to secure robust credit ratings of A (Negative) / Baa1 (Stable) / A- (Stable) from S and P, Moody's, and Fitch, respectively, reflecting its solid financial standing and capital framework. ADNOC and OMV aim to sustain investment-grade credit ratings for the new entity.
The strategic expansion of Borouge Group International AG will create a geographically diversified platform in the polyolefins sector, integrating production across three continents and serving a global customer base. This extensive reach, coupled with strong shareholders and a solid capital structure, promises resilience and sustainable shareholder returns.
ADNOC and OMV emphasize the significance of the planned tender offer to streamline the organizational structure, facilitating value creation from this new global growth platform. Scheduled for 2027, subject to market conditions and regulatory approval, the tender offer will convert Borouge Plc shares into Borouge Group International AG shares to maximize shareholder value.
Until the tender offer, Borouge Group International AG will remain privately held, with Borouge Plc shares listed on the Abu Dhabi Securities Exchange (ADX). The recent credit ratings consider the impacts and flexibility regarding the future equity raise and B4's planned acquisition at cost by Borouge Group International AG.
Borouge Plc shareholders and Borouge Group International AG's owners, ADNOC and OMV, will gain from the Agreement's accretion. Additionally, Borouge Plc shareholders are expected to benefit from a planned annual dividend commitment of 16.2 fils per share, to be sustained by Borouge Group International AG after the tender offer completion.
Post-completion, ADNOC's stake in Borouge Group International AG will be transferred to XRG, ADNOC's wholly-owned subsidiary, enhancing XRG's Global Chemicals Platform and supporting its goal to become a top three global chemicals investor. Borouge Group International AG will be jointly controlled as a 50/50 partnership between XRG and OMV AG. Both companies, as committed long-term owners, aim to unlock Borouge Group International AG's full potential, including synergy realization.