Abu Dhabi's International Petroleum Investment Company (IPIC) has entered into an agreement to purchase Canada's Nova Chemicals in a deal valued at $2.3 billion, which includes the acquirer taking on the target's debt. This continues a trend of the wealthy emirate making acquisitions in Canada.
The sale is going ahead at a price of $6 per share for Nova shares traded on the New York Stock Exchange, which represents a 348% premium to the closing price on February 20; and a 204% premium above the combined and currency-adjusted 30-day volume-weighted average price of the company's shares in New York and Toronto.
In response to the news of the deal, Nova NYSE-listed shares rallied 288% on Monday to $5.21. However, even after this boost, the shares are still trading at about 20% of the $30 price they reached last summer.
A special meeting for Nova shareholders is expected to be held in April. For the deal to go ahead, at least two-thirds of the shares represented at the meeting need to vote in favour. The company board is recommending that shareholders approve the deal. UBS and RBC Capital Markets, who are acting as financial advisors to Nova, have judged the deal as fair from the shareholder point of view. HSBC is IPIC's sole financial advisor.
Nova Chemicals is a chemicals and plastics company that has one product line focusing on ethylene and polyethylene and another consisting of styrene and polystyrene. It makes consumer, industrial and packaging products. The US provides 45% of its revenues, while 35% comes from Canada and the remaining 20% from Europe and other regions.
IPIC is a state-owned enterprise in Abu Dhabi with a net worth of more than $14 billion, tasked with earning commercial rates on overseas investments in hydrocarbons and other related sectors.
The company has invested in downstream hydrocarbon operations, petrochemical plants, pipelines, power utilities and shipping. In 2006 it bought a 20% stake in Oman Polypropylene; in 2007 it acquired 21% Cosmo Oil Company in Japan; and last year its investments included a 70% stake in German industrial services firm MAN Ferrostaal.
The Nova investment comes after three acquisitions in Canada by another Abu Dhabi-based firm in 2007. State-controlled Abu Dhabi National Energy Corporation, also known as TAQA, bought Northrock Resources for $2 billion, PrimeWest Energy Trust for $5 billion and Pioneer Natural Resources Company's Canadian unit for $540 million.
