Borealis Acquisition: Key Details, Impact, and What Comes Next

OMV's acquisition of an additional 39% stake in Borealis from Mubadala, finalized on October 29, 2020, marks a significant move in the chemicals industry. This transaction, valued at USD 4.68 billion, elevates OMV's shareholding in Borealis to 75%. The acquisition strategically extends OMV's value chain into high-value chemicals, enhancing its market position and operational capabilities.

What Is Borealis?

Borealis, founded in 1994, specializes in polyolefins and base chemicals, providing innovative solutions for industries such as energy, consumer products, mobility, healthcare, and infrastructure. The company differentiates itself through a strong commitment to sustainability and the circular economy, aiming for a carbon-neutral future. Borealis is recognized for its high-quality, circular solutions and extensive industry expertise, supported by multiple innovation centers and recycling locations across Europe, serving over 120 countries.

Who Acquired Borealis?

OMV is a key player in the energy and chemicals industry, focusing on creating sustainable energy, mobility, and lifestyle solutions. The company offers a diverse range of products, including sustainable aviation fuel, green hydrogen, and renewable power. OMV is also involved in chemicals, providing sustainable base chemicals and polyolefins. With a strong emphasis on innovation and sustainability, OMV is positioned as a forward-thinking company, aiming to become a net-zero business by 2050.

When Was Borealis Acquired?

OMV's acquisition of Borealis was finalized on October 29, 2020. This strategic move came during a period marked by significant industry shifts, including the COVID-19 pandemic's impact on market dynamics. Despite these challenges, Borealis reported a 6% increase in operating cash flow in the first nine months of 2020. The acquisition aligns with OMV's strategy to extend its value chain into high-value chemicals and position itself for a lower carbon future.

Why Was Borealis Acquired?

• Market Expansion: OMV's acquisition of an additional 39% stake in Borealis, increasing its shareholding to 75%, significantly expands its market presence. This move positions OMV as the number one producer of ethylene and propylene in Europe and one of the top 10 polyolefin producers worldwide. The acquisition extends OMV’s value chain towards higher value chemical products, enhancing its market reach and operational capabilities.
• Technology Integration: Borealis' activities in plastic recycling, such as EcoPlast and MTM Plastics, and initiatives like Design For Recycling (DFR), complement OMV’s ReOil® technology. This technology converts hard-to-recycle plastic waste into high-quality feedstock for its refineries, substituting the need for crude oil. The integration of these technologies supports OMV’s sustainability and circular economy goals, enhancing its technological capabilities.
• Competitive Advantage: The acquisition provides OMV with a controlling stake in Borealis, making it a leading provider of polyolefins and base chemicals. This strategic extension into high-value chemicals offers a natural hedge against market volatility, enhancing OMV’s competitive position in the global market. Additionally, the synergies identified from the transaction are expected to increase from EUR 700 million to more than EUR 800 million, further strengthening OMV's market position.

Acquisition Terms

• Acquisition Price: The purchase price of the transaction amounts to USD 4.68 billion.
• Payment Method: OMV paid the entire amount in cash at closing, following the successful issuance of senior and hybrid bonds of EUR 4.5 billion.
• Key Conditions or Agreements:
  • OMV is entitled to all dividends related to the additional shares in Borealis distributed after December 31, 2019.
  • The transaction was completed in line with the expected timeline and in accordance with all regulatory requirements.
  • OMV will fully consolidate the results of Borealis in its financial statements.
  • OMV has identified synergies, increasing the synergy potential from EUR 700 million to more than EUR 800 million.
  • OMV has started a divestment program to realize EUR 2 billion by the end of 2021, including the sale of a 51-percent share in OMV’s gas logistics subsidiary Gas Connect Austria.

Impact on Borealis

The acquisition of Borealis by OMV has led to notable changes in operations and management. OMV now holds a 75% stake in Borealis, resulting in the full consolidation of Borealis' results into OMV's financial statements. This shift has streamlined operations, with OMV leveraging Borealis' expertise in polyolefins and base chemicals to enhance its market position. Additionally, the integration of Borealis' recycling initiatives with OMV's ReOil® technology has bolstered their collective efforts towards a circular economy, aligning with OMV's sustainability goals.

In terms of product offerings and services, the acquisition has expanded Borealis' capabilities, particularly in high-value chemicals and recycling. This strategic move has positioned Borealis as a leading provider of polyolefins and base chemicals, enhancing its product portfolio and market reach. Employee reactions have been generally positive, with the workforce recognizing the potential for growth and innovation. Customers have also responded favorably, appreciating the enhanced product offerings and the company's strengthened commitment to sustainability. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly and efficiently.