Talks between ADNOC and OMV over the $30bn merger of their chemical businesses have stalled due to a series of disagreements, reported the Financial Times, citing sources.
The talks, which had been progressing towards a significant deal announcement, are currently in a “pencils down” phase, according to sources familiar with the situation.
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At a critical juncture in mid-December, the companies were close to finalising the merger, with practice runs of analyst presentations already conducted.
Disagreements ranging from minor details such as the merged entity’s name to more substantial issues have caused a pause in negotiations.
Despite the current impasse, there is still a possibility that discussions could resume, leading to a successful merger.
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Responding to the development OMV said: “We are in ongoing and open-ended negotiations and cannot comment further.”
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By GlobalDataADNOC declined to comment on the news, reported the publication.
The complexity of the transaction and intertwined shareholdings between ADNOC and OMV’s chemical arms are central to the negotiation challenges.
The proposed deal would see the combination of OMV’s Borealis, which is 75% owned by OMV and 25% by ADNOC, with ADNOC’s Borouge.
Borouge, with a market value of approximately $20bn, is 54% owned by ADNOC and 36% by Borealis.
Further complicating the merger is ADNOC’s December 2022 agreement to acquire a near 25% stake in OMV from Mubadala Investment Company.
This transaction is still awaiting final regulatory approvals, which has delayed the potential Borouge-Borealis combination.
The merger’s objective, as outlined in a July framework, is to establish a jointly controlled, listed platform for future growth and acquisitions, aiming to create a new industry leader with combined expertise in Europe and the Middle East.
However, Borealis’ recent underperformance and OMV’s limited cash reserves compared with ADNOC’s could pose challenges to maintaining an equal partnership, especially when pursuing further acquisitions.
Another sticking point has been the valuation of Borealis, which is unlisted and could be worth around $10bn, while OMV’s market valuation is nearly €14bn ($15.15bn).
The ADNOC-OMV discussions are part of ADNOC’s broader strategy to diversify its revenue streams by expanding into the petrochemical sector.
This includes ongoing negotiations with German chemical company Covestro over a potential acquisition as ADNOC continues to seek growth opportunities in the industry.
