BP announced today that it has agreed to sell its global petrochemicals business to Ineos in a $5 billion deal. The sale of its aromatic and acetyls businesses, including all related assets, technology, and licenses, will further strengthen BP’s balance sheet and achieve the target for agreed divestments a year ahead of schedule, the company said in a press release.
BP’s aromatics and acetyls businesses have interests in 14 manufacturing plants in Asia, Europe, and the United States; in 2019, they produced 9.7 million metric tons of petrochemicals.
|Storage tank at BP's Cooper River plant, near Charleston, SC. Image courtesy BP.|
“These businesses are leaders in their sectors, with world-class technologies, plants, and people,” said BP CEO Bernard Looney. “In recent years they have improved performance to produce highly competitive returns and now have the potential for growth and expansion into the circular economy."
Looney went on to say that the overlap of the petrochemicals business with the rest of BP is limited and would take considerable capital to grow. “As we work to build a more focused, more integrated BP, we have other opportunities that are more aligned with our future direction. Today’s agreement is another deliberate step in building a BP that can compete and succeed through the energy transition,” said Looney.
Chemicals company Ineos has a network spanning more than 180 sites in 26 countries and employing some 22,000 staff worldwide. Over the past two decades, Ineos has acquired a number of businesses from BP, most notably the 2005 $9 billion purchase of Innovene, the BP subsidiary that comprised the majority of BP’s then chemicals assets and two refineries, noted the press release.
Commenting on BP’s divestment of its petrochemicals business, Steve Jenkins, Vice President of Wood Mackenzie’s petrochemicals team, noted that “BP held onto these assets in 2005, when they were making strong profits. Now these chemicals businesses are struggling with over-capacity and BP is urgently raising cash. This move makes strategic sense,” said Jenkins. “Ineos is, no doubt, relying upon capturing significant operational synergies as it integrates the two businesses. The deal includes a number of collocated assets and represents a good overall portfolio fit with very limited overlap,” added Jenkins.
BP’s aromatics business is a global leader in the production of purified terephthalic acid (PTA), a key feedstock for the manufacture of polyester plastics, and its precursor paraxylene (PX). The business’s largest manufacturing plants are in China, the United States, and Belgium, and it licenses its leading PTA production technology to producers around the world.
The acetyls business produces acetic acid and derivatives such as acetic anhydride, which have uses in a range of sectors. It has a diverse base with manufacturing plants in the United States, United Kingdom, China, Korea, Taiwan, and Malaysia. The sale will also include related interests such as the chemical recycling technology BP Infinia and BP’s interest in acetylated wood developer Tricoya.
In total, the businesses included in the transaction currently employ over 1,700 staff worldwide. These staff are expected to transfer to INEOS on completion of the sale.
Under the terms of the agreement, Ineos will pay BP a deposit of $400 million, and will pay a further $3.6 billion on completion. An additional $1 billion will be deferred and paid in three separate installments of $100 million in March, April, and May 2021, with the remaining $700 million payable by the end of June 2021. Subject to regulatory and other approvals, the transaction is expected to complete by the end of 2020.