Struggling Canadian polyethylene and polystyrene producer Nova Chemicals (Calgary; www.novachem.com) has found a powerful suitor in the Middle East, nailing down a USD 6 per share cash takeover offer from Abu Dhabi sovereign wealth fund (state-owned investment company) International Petrochemical Investment Company (IPIC, Abu Dhabi / UAE; www.ipic.ae). Including debt, the acquisition price totals USD 2.3 bn. Nova’s board of directors has unanimously recommended that shareholders accept the offer, and an extraordinary general meeting has been convened for 1 April.

The acquisition is planned to be implemented through a court-approved plan of arrangement under the Canadian Business Corporations Act. The agreement with IPIC binds Nova’s hands as regards accepting offers from any other potential bidders and provides for a termination fee of at least USD 15m in “certain circumstances.” However, analysts say the conditions, especially a USD 250m credit backstop to assure the Canadian plastics producer’s continued liquidity, are so favourable that this will not be an issue. Nova will continue to be based in Canada and operate independently, and the restrictions on deals with sovereign wealth fund are regarded as easily surmountable.

The Middle East bid came as Nova faced a 28 February deadline to come up with USD 100m in additional funding. On 22 February, it announced it had secured USD 150m in fresh financing through a revolving credit facility with state-backed Export Development Canada (EDC) and a syndicate of three Canadian banks. The group has been in a financially precarious state for some time. For the fourth quarter of 2008 it reported a loss of USD 214m on sales of USD 1.2 bn, and Ineos Nova styrenics joint venture plunged into the red – see Plasteurope.com of 10.02.2009.

On news of the IPIC offer, Nova’s share rose by nearly 350%. Some analysts compared the deal favourably with Dow’s failed attempt to link with Kuwait’s Petrochemicals Industries Company (PIC, Sabahiya; www.pic.com.kw), even if this is a much smaller transaction and the UAE is not an oil-rich country. The Nova takeover also has advantages for IPIC, which will be able to add a North American asset to its global petrochemicals portfolio. The UAE holding is a majority shareholder in Borealis and Borouge. Alongside a 20% stake in Middle Eastern PP producer Oman Polyproplyene it also holds 9.5% stake in Spain’s Compania Espanola de Petrolios (Cepsa) and thus is an indirect shareholder in PET giant La Seda de Barcelona.

A special acquisition website can be accessed at www.ipiccanada.com.