Energy giant BP PLC has agreed to sell its petrochemicals business to British chemicals company Ineos Ltd. in a $5 billion deal that will help reshape its business for the global transition to lower-carbon energy, the company said on Monday.
The move separates BP from its peers, as Royal Dutch Shell PLC and Exxon Mobil Corp. have been growing their petrochemicals businesses. BP said it would have taken considerable investment to grow the division, which is smaller than its peers’ businesses.
“This is another significant step as we steadily work to reinvent BP,” said Bernard Looney, Chief Executive of BP.
Mr. Looney, who took the helm in February, had been crafting a yet-to-be revealed reorganization plan, due to launch in September.
Ineos is one of the world’s largest chemical producers. It was founded in 1998 and is majority owned by British billionaire Jim Ratcliffe, one of the U.K.’s richest men. Last year, it bought two polystyrene plants in China from French energy giant Total SA.
The Ineos deal will help BP reach its divestment target of $15 billion of asset sales by mid-2021. Among the major oil companies, the company has one of the highest levels of debt relative to its size.
“The deal goes some way to fill the cash-flow deficit faced by BP,” said Irene Himona, managing director for oil-and-gas equity research at Société Générale.
As part of the deal, Ineos will pay a deposit of $400 million and $3.6 billion upon completion, which is expected by the end of the year. The $1 billion remainder will be paid by the end of June 2021.
Earlier this month, BP said it was cutting 14% of its global workforce, accelerating existing plans to reshape the company after the coronavirus pandemic’s crushing impact on oil prices.
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