IPIC Acquires NOVA Chemicals in All-Cash Deal of $2.3 Billion

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Researched by Industrial Info Resources (Sugar Land, Texas)--International Petroleum Investment Company (IPIC) (Abu Dhabi, United Arab Emirates) has announced a takeover of the Canadian NOVA Chemicals Corporation (NYSE:NCX) (Calgary, Alberta) in a deal described as a friendly, all-cash acquisition at the price of $6 per share. The total value of the deal, including the assumption of NOVA Chemicals' net debt obligations, is around $2.3 billion.

IPIC is wholly owned by the government of United Arab Emirates and is run by an independent board of directors. The company was formed in 1984 and assumes responsibility for investments in the hydrocarbon and related sectors outside the country. IPIC already has considerable investments in Austria, Egypt, Germany, Japan, Pakistan, Portugal, Spain and South Korea among other countries and has an estimated net worth of more than $14 billion.

IPIC's investments are in diverse portfolios such as hydrocarbon operations, petrochemical plants, shipping, power utilities and pipelines. The company is currently involved in the Abu Dhabi Crude Oil Pipeline project, which is scheduled for completion by 2010 and is aimed at reducing the dependency on oil terminals in the Arabian Gulf and shipping congestion through the Strait of Hormuz. A 1.2-meter-diameter pipeline will be constructed over a distance of 370 kilometers from Habshan to the port of Fujairah on the Gulf of Oman and will have the capacity to carry up to 1.5 million barrels of oil per day.

NOVA Chemicals is one of the world's leading plastics and chemicals companies, developing and supplying materials to manufacturers of consumer, industrial and packaging products. The firm generates nearly 45% of its revenue in the U.S., 35% in Canada, and the remainder in Europe and other regions.

NOVA Chemicals has headquarters in Canada and executive offices in Pittsburgh, Pennsylvania. The company has operated independently since 1998, and had considered several alternatives before agreeing to the IPIC offer. The firm was reeling under the effect of the global economic recession with a decline in the value of its stock and bonds and slack market demand for the chemical commodities produced by the firm. Investors had grown increasingly concerned about the company's ability to meet its debt commitments.

With operations mainly based in North America and Canada, NOVA Chemicals geographically complements IPIC's desire to grow beyond its existing petrochemical operations in the Middle East, Europe and Asia. Under the proposed deal, NOVA would continue to operate as an independent company and continue to invest in its Alberta and Ontario operating facilities in addition to supporting very productive research facilities in Calgary. IPIC will provide strategic guidance at the board level but will encourage significant management autonomy. NOVA will continue to manage its operations and set business objectives from North America.

NOVA Chemicals' most prominent asset is the Joffre polyethylene and ethylene complex in Alberta, one of the largest facilities of this type in the world. The $725 million complex is a 50:50 joint venture between NOVA Chemicals and the Dow Chemical Company (NYSE:DOW) (Midland, Michigan), with NOVA Chemicals operating the plant. Construction of the complex began in 1998. The ethylene plant was completed at the end of 2000 and the polyethylene plant, delayed by engineering problems and a shortage of skilled labor in the area, came online in July 2001. The total ethylene production from the complex is 2.82 million tons per year, and polyethylene production is around 914,000 tons per year.

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