The agreement will result in the takeover by Ineos of BP’s aromatics division, which produces polyester chemicals used in clothing, films and packaging, as well as the acetyl business of BP, whose products are used in food flavorings, paints and glues.
Falling oil prices caused by the coronavirus pandemic have damaged the finances of oil producers around the world, accelerating BP’s need to cut costs and restructure. BP said the crisis would reduce the value of its assets by up to £ 14 billion and cut 10,000 jobs worldwide.
BP CEO Bernard Looney said he agreed the sale would be a surprise to the petrochemical industry and that the company “will do our best to minimize uncertainty” for the 1,700 workers who will move to Ineos.
By the time it and other sales are completed, BP will have reached its $ 15 billion asset divestment goal as it attempts to reduce more than $ 60 billion in debt to the end of the first trimester.
Looney said: “Strategically, the overlap with the rest of BP is limited and we would need considerable capital to develop these businesses. ”
The move took analysts by surprise and BP shares rose 3.5% to £ 3.15. The stock price is still down about a third since the start of the year.
For Ineos, the agreement represents a doubling of its bet on plastics, despite long-term and far-reaching campaigns against the rising tide of plastic waste. The pandemic was seized by some supporters of single-use packaging.
Ineos, the UK’s largest private company, said sales and profits were down in the first quarter of 2020 compared to the previous year, but Tom Crotty, a director, said in April had not been affected by the disruption caused by the pandemic. In March, Ineos built two hand sanitizer factories to meet an increased need during the height of the crisis.
The petrochemical acquisition is just the latest agreement by Ratcliffe, president of Ineos, whose stake in the company has given him a fortune estimated this year at £ 12.2 billion by the Sunday Times, which makes him the fifth richest person in Britain.
Ineos, which started with a takeover of BP’s chemical operations in 1992, has reached annual sales of $ 60 billion. In 2005, Ineos entered into another agreement with BP, paying $ 9 billion for Innovene, a subsidiary that at that time comprised the majority of the oil company’s chemical assets and two refineries.
Ineos said the petrochemical agreement was “well suited” to its existing operations, including the reinstatement of two parts of a site in Hull and the expansion of the company’s operations in Geel, Belgium. It will include the transfer of facilities to the United States, the United Kingdom and Belgium, as well as to the Asian growth markets of China, Korea, Taiwan and Malaysia. In 2019, companies produced 9.7 million tonnes of petrochemicals.
Ratcliffe said, “We are delighted to acquire these leading BP companies, expanding Ineos’ position in the global petrochemical industry and offering great potential for expansion and integration with our existing businesses.”
One of the main supporters of the Brexit campaign, Ratcliffe has used his wealth to finance a number of surprising investments far from his core business in recent years, notably by buying the French football club in Nice and the British cycling team previously known as Team Sky, and investing in work on a successor to the rugged Land Rover Defender all-terrain vehicle.