Global oil giant British Petroleum (BP) has sold its petrochemicals business to a UK-based multinational chemical company, INEOS in a deal worth $5 billion. The move will further strengthen its balance sheet and meet the agreed divestments plans decided last year, earlier than the scheduled timeframe.
Ineos will immediately make a payment of $400 million, followed by another $3.6 billion when the deal concludes with a further payment of $1 billion decided to be paid in three installments by June 2021.
Through the deal, INEOS will acquire BP’s aromatics division, which manufactures chemicals for the polyester used in clothing, film and packaging, as well as BP’s acetyls unit, whose products are utilized in food flavorings, paints and glues.
Forced by the decline in oil prices triggered by the coronavirus pandemic BP had to make cost cuts and carry out a restructuring similar to its other petrochemical rivals. BP expects the crisis to strip more than $17.2 billion worth assets along with 10,000 jobs from its venture worldwide.
Mr. Bernard Looney, BP’s CEO said that he acknowledged the sale would be a “surprise” for the petrochemicals business and the company would “do our best to minimize uncertainty” for workers.
The deal gives a major boost to INEOS which has put a lot behind plastics as the pandemic creating a conducive environment for single-use packaging above the long-running campaigns against plastic waste.
INEOS which had dealt with BP earlier for a buyout of BP’s chemicals business in 1992, has grown into the UK’s largest private company, with an annual turnover of $60 billion.
INEOS referred the deal as “a good fit” with its existing businesses, including combining two parts of a site in Hull along with expanding its operations in Geel, Belgium. It deal will include the ownership transfer of facilities in the US, UK, Belgium, China, Korea, Taiwan and Malaysia.
INEOS Founder and Chairman, Sir Jim Ratcliffe 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.”