Ineos deal sees BP take $5bn step away from fos­sil fu­els

Global petro­chem­i­cals di­vi­sion sold to Sir Jim Rat­cliffe as oil gi­ant cuts car­bon-in­ten­sive as­sets

The Daily Telegraph - Business - - Business - By Ed Clowes and Si­mon Foy

‘The agree­ment is an­other de­lib­er­ate step in build­ing a BP that can suc­ceed through the en­ergy tran­si­tion’

BP IS sell­ing its global petro­chem­i­cals busi­ness to bil­lion­aire Sir Jim Rat­cliffe for $5bn (£4bn) as the oil ti­tan con­tin­ues its push away from fos­sil fu­els.

Bernard Looney, the chief ex­ec­u­tive, said the sale to Sir Jim’s firm Ineos means it will meet as­set sales tar­gets a year ahead of sched­ule while strength­en­ing the com­pany’s bal­ance sheet.

The di­vi­sion in­cludes two main busi­nesses – aro­mat­ics and acetyls – across 14 plants in Europe, Asia and the US that pro­duced al­most 10m tons of petro­chem­i­cals last year. They make in­gre­di­ents for ev­ery­thing from soft drink bot­tles to car­pets.

The deal is ex­pected to be com­pleted by the end of this year as­sum­ing it is signed off in time by reg­u­la­tors.

Ineos will pay a de­posit of $400m for the busi­ness and a fur­ther $3.6bn when the deal com­pletes. The fi­nal $1bn will be paid in in­stal­ments by June 2021.

Founded by Sir Jim in 1998, the firm has long sought to snap up busi­nesses dur­ing down­turns us­ing its fi­nan­cial fire­power. This deal is one of its big­gest ac­qui­si­tions yet.

The pur­chase of BP’s as­sets will mean Ineos ex­tends its reach into polyester, al­low­ing it to pro­duce prod­ucts such as cloth­ing fab­rics, while ex­pand­ing its oper­a­tions in Asian mar­kets in­clud­ing China and South Korea.

Ineos spent £9bn on a num­ber of BP’s petro­chem­i­cals fa­cil­i­ties in 2005, a trans­for­ma­tive deal which formed the ba­sis of an em­pire that now also en­com­passes leather jacket maker Bel­staff, Swiss foot­ball club FC Lau­sanne-Sport and a 4x4 car­maker in Brid­gend, South Wales.

At the time, BP re­fused to sell a hand­ful of its re­main­ing petro­chem­i­cals as­sets to Ineos – but 15 years later it has re­versed that as it seeks to cut back its stake in car­bon-in­ten­sive oper­a­tions.

Sir Jim, one of Bri­tain’s rich­est peo­ple with an es­ti­mated £12.2bn for­tune, said: “We are de­lighted to ac­quire th­ese top-class busi­nesses from BP, ex­tend­ing the Ineos po­si­tion in global petro­chem­i­cals and pro­vid­ing great scope for ex­pan­sion and in­te­gra­tion with our ex­ist­ing busi­ness.”

An­a­lysts at Beren­berg said that while they still ex­pect BP to fol­low in Shell’s foot­steps by cut­ting its pay­out to share­hold­ers this quar­ter, the sale could al­low the div­i­dend to be main­tained.

Mean­while, an­a­lysts at Credit Suisse said the deal high­lights BP’s con­tin­ued tran­si­tion away from oil.

How­ever, they warned that fur­ther in­vest­ment will be needed to in­crease its low-car­bon oper­a­tions.

In Fe­bru­ary soon af­ter he took over as chief ex­ec­u­tive, Mr Looney laid out plans to re­duce BP’s reliance on fos­sil fu­els and achieve net zero car­bon emis­sions by 2050.

He said: “Strate­gi­cally, the over­lap with the rest of BP is lim­ited and it would take con­sid­er­able cap­i­tal for us to grow th­ese busi­nesses. To­day’s agree­ment is an­other de­lib­er­ate step in build­ing a BP that can com­pete and suc­ceed through the en­ergy tran­si­tion.”

The deal means BP has now agreed $15bn of as­set sales since the start of 2019 – a fig­ure not ex­pected to be reached un­til mid-2021.

It comes af­ter the com­pany an­nounced plans to cull 10,000 jobs ear­lier this month and cut its long-term fore­cast for oil and gas prices.

Oil com­pa­nies are striv­ing to shore up their fi­nances af­ter lock­downs de­stroyed global de­mand for crude.

The petro­chem­i­cals busi­nesses in­cluded in the sale em­ploy 1,700 staff world­wide and are ex­pected to trans­fer to Ineos.

Shares in BP closed more than 3pc higher at 314.9p, valu­ing the com­pany at £64bn.

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