OMV to sell $2.3 billion of assets to fund purchase of plastics maker

By Kirsti Knolle

VIENNA (Reuters) - Austrian oil and gas group OMV <OMVV.VI> plans to sell $2.3 billion (1.8 billion pounds) of assets by the end of next year to help fund a $4.7 billion deal to make it the majority owner of plastics maker Borealis and one of the world's leading polymer producers.

OMV signed on Thursday the previously announced deal with Abu Dhabi state investor Mubadala [MUDEV.UL] that will see it increase its stake in Borealis to 75% from 36%.

"This transaction is not just another milestone in the implementation of our strategy, but the biggest transformation in OMV’s history," said Chief Executive Rainer Seele.

"This turns OMV into a global oil, gas and chemicals group, whose integrated business model extends from the wellhead to high-quality plastic and repositions the group for a low carbon future."

The 59-year-old German has shifted OMV's focus for growth from low-cost oil and gas in Russia towards the Middle East, where he wants to become a major supplier of plastics for China.

The acquisition gives OMV more say in a key project on the Abu Dhabi coast, where Borealis is the part-operator of the Ruwais refinery via its Borouge joint venture with the Abu Dhabi National Oil Company (ADNOC).

ADNOC plans to develop the Ruwais complex with a $45 billion investment into the world's largest integrated refinery and petrochemicals plant.

Borealis also has a petrochemical joint venture with French oil group Total <TOTF.PA> in Texas in the United States.

OMV plans to fully consolidate Borealis results, it said. OMV reported 2019 sales of 23.5 billion euros ($26.4 billion), Borealis of 9.8 billion euros.

Mubadala, which also owns 24.9% of OMV, said it would keep its remaining 25% stake in Borealis. "As a significant shareholder in OMV, we recognise the strong strategic fit and the complementary nature of Borealis's business in expanding its downstream position," it said.

DIVESTMENTS

A first divestment could be OMV's 51% stake in gas pipeline operator Gas Connect Austria to hydropower specialist Verbund <VERB.VI>. Austria's largest utility said on Thursday it was in exclusive talks with OMV over a possible deal.

OMV sold a 49% stake for 601 million euros to German insurer Allianz <ALVG.DE> and Italian gas grid company Snam <SRG.MI> in 2016.

The Austrian group also plans to sell its 287 filling stations in Germany, focused on the states of Bavaria and Baden-Wuerttemberg, it said.

Other measures OMV announced to keep its costs under control included delaying or re-evaluating some projects, a cut in planned investments for this year, and synergies of 700 million euros by the end of 2025.

The energy group delayed plans for a nearly 1 billion euro purchase of Siberian gas assets on Friday.

(Reporting by Kirsti Knolle; editing by Emelia Sithole-Matarise and Mark Potter)