OMV May Sell 36% Borealis Stake to IPIC to Postpone Potential Share Sale

OMV AG (OMV), central Europe’s biggest oil company, may be able to postpone a potential share sale by selling its 36 percent stake in Borealis A/S to International Petroleum Investment Co.

“There’s always a possibility” that IPIC, as the Abu Dhabi state-owned company is known, may buy the stake, Borealis’s Chief Executive Officer Mark Garrett told reporters in Abu Dhabi yesterday. IPIC currently owns 64 percent of the Vienna-based provider of plastics for packaging.

OMV is seeking to reduce debt after last year’s 1 billion euro ($1.5 billion) acquisition of Petrol Ofisi AS, Turkey’s biggest fuel retailer. A share sale is one option being considered to finance the deal.

“The sale of Borealis could be a viable way to avoid a share sale,” said Philipp Chladek, an analyst at Raiffeisen Centrobank AG. Chladek said the stake could be worth as much as 1 billion euros.

“There currently are no talks in this direction,” Michaela Huber, a spokeswoman for OMV, said by phone. IPIC Managing Director Khadem Al Qubaisi didn’t answer a call and text message to his mobile phone seeking comment.

OMV in October raised its holding in Petrol Ofisi to 96 percent, pushing the gearing ratio, a measure of indebtedness, to 45.7 percent at the end of December from 33 percent a year earlier. OMV’s medium-term goal is 30 percent.

Chief Executive Officer Gerhard Roiss said March 31 that OMV would make a decision on how to lower its gearing in May or June.

Credit Ratings

After announcing the Petrol Ofisi deal, OMV said it was still determining whether to issue new stock, convertible bonds or hybrid capital to finance the acquisition. A decision will be taken in the first half of this year, Chief Financial Officer David Davies said in February. He declined to say how much a share sale would have to raise to maintain OMV’s credit ratings.

OMV is in talks with Moody’s Investors Service and Fitch Ratings “in terms of what might be the best options to restructure the financing,” Davies said at the time. OMV is rated A3 at Moody’s and A- at Fitch, the fourth-lowest investment grade.

“OMV has equity needs of 1.5 billion euros, so they aren’t completely covered with a sale of Borealis,” said Raiffeisen’s Chladek. “Overall this is positive for OMV, although they would be losing associated income, which in 2010 was 109 million euros.”

Borealis had net income of 333 million euros on revenue of 6.3 billion euros last year, according to its annual report.

OMV has held a stake in Borealis since 1998 and in 2005 took over the company with IPIC. OMV’s Roiss said in March that the long-term aim for Borealis was an IPO, with nothing concrete planned for the time being.

IPIC has owned a stake in OMV since 1994 and now holds 20 percent. The Austrian government has 32 percent of OMV.

To contact the reporter on this story: Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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