29th Jun 2020 10:09
(Alliance News) - Oil major BP PLC on Monday said it has agreed to sell its petrochemicals business to privately owned UK chemicals company Ineos for USD5 billion as part of a plan to "reinvent BP".
Shares in FTSE 100-listed BP were up 1.5% at 309.02 pence each in London. Year-to-date the stock is down 36%, however, due to weak oil prices and the Covid-19 pandemic.
Under the agreement, Ineos will pay BP a deposit of USD400 million and will pay a further USD3.6 billion on completion. An additional USD1 billion will be deferred and paid in three separate instalments of USD100 million in March, April and May 2021 with the remaining USD700 million payable by the end of June 2021.
The sale, which is slated to complete by the end of 2020, is expected to strengthen BP's balance sheet and delivers its USD15 billion divestment target a year early than originally scheduled, it noted. Proceeds from the sale will be used by BP for general corporate purposes.
BP's Chief Executive Bernard Looney said: "This is another significant step as we steadily work to reinvent BP. I recognise this decision will come as a surprise and we will do our best to minimise uncertainty.
"Strategically, the overlap with the rest of BP is limited and it would take considerable capital for us to grow these businesses. 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."
BP's petrochemicals business is focused on two main businesses, aromatics and acetyls. In total, the businesses have interests in 14 manufacturing plants in Asia, Europe and the US and in 2019 produced 9.7 million tonnes of petrochemicals.
The aromatics business produces purified terephthalic acid, a key feedstock for the manufacture of polyester plastics and its precursor paraxylene. The acetyls business makes acetic acid and derivatives such as acetic anhydride, which have uses in a wide range of sectors.
The gross assets being sold amounted to USD3.50 billion as December 31, 2019. The businesses recorded a replacement cost profit before interest and tax of USD396 million in 2019.
Ineos previously has acquired a number of businesses from BP, most notably the 2005 USD9 billion purchase of Innovene, the BP subsidiary that comprised the majority of BP's then chemicals assets and two refineries.
BP is scheduled to release its second quarter 2020 results on August 4.
By Tapan Panchal; [email protected]
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