Abu Dhabi's IPIC to buy debt-laden Nova Chemicals
CALGARY, Alberta (Reuters) - Abu Dhabi state-owned International Petroleum Investment Co launched a $500 million takeover of Nova Chemicals Corp (NCX.TO) on Monday, a friendly deal to rescue the plastics maker from a financial crisis due to its high debt.
Nova shares nearly quadrupled to C$6.49 on the Toronto Stock Exchange. Its New York-listed stock surged $4.87 to $5.40. The stock had shed 95 percent of its value as industry conditions worsened over the past year.
IPIC said it will offer $6 a share, a 348 percent premium over Nova's Friday close. With assumed debt, the deal is worth $2.3 billion.
Nova stock and bonds have been beaten down as demand for commodity chemicals -- used to make products as diverse as food packaging, building materials and electronics components -- withered with global economies. Investors fretted over the company's ability to meet its debt obligations.
Chief Executive Jeff Lipton said the company, which has operated independently for 11 years, had pored over several options to remain afloat before agreeing to IPIC's offer.
Lipton, known for his unbending optimism about the chemical industry, told analysts that demand for products has increased, but investors remained fixed on Nova's financing struggles.
"Having been through it, I would tell you the banks, the markets, the financial world are in real turmoil," he said. "But if you can find investments that, once they get beyond the issues -- and most of them will -- have truly outstanding fundamentals, it seems to me that you ought to be thinking about that as investors and not just the short-term concerns."
The deal allows Nova to shore up its balance sheet so it can operate and expand, the firms said. IPIC will give Nova a $250 million backstop facility to improve liquidity.
Meanwhile, Nova won a new $150 million credit facility from Export Development Canada on Sunday, allowing it to meet a key debt commitment before month's end.
"It's definitely a positive development for the company -- a substantially higher share price in light of the liquidity issues that they've been facing, which has depressed the stock," said Jarrett Bilous, vice-president at bond rating agency DBRS. "But there are uncertainties that remain. The deal still has to be approved."
"PERFECT MARKET" FOR EMIRATE
Nova has plants in Canada, the United States and Europe that make ethylene, polyethylene, styrene and its derivatives. It is based in Canada but has its executive offices in Pittsburgh, Pennsylvania.
IPIC said Nova's assets will complement its own in Europe, the Middle East and Asia.
"This is the perfect market for us," a senior IPIC official said. "We would also utilize complementary technologies that Nova provides to have a bigger product range to offer."
The deal marks the latest in a string of Canadian acquisitions for Abu Dhabi's investment companies, although most have been in the oil and gas production business. Continued...
