Nova and BP to Merge Polystyrene in Europe

MERGERS & ACQUISITIONS

Nova Chemicals and BP are combining their European polystyrene operations into a 50-50 joint venture that is expected to have annual sales of about $1 billion.

To the joint venture, Nova plans to contribute plants in the U.K., the Netherlands, and France that have a combined annual capacity for 265,000 metric tons of solid polystyrene and 245,000 metric tons of expandable polystyrene.

BP will contribute its units in Germany, France, and Sweden, with their combined capacity of 454,000 metric tons of solid polystyrene and 170,000 metric tons of expandable polystyrene. BP’s 50% interest will be held by its olefins and derivatives business, which the company intends to spin off into a separate company next year.

Nova CEO Jeffrey M. Lipton says the merger will position the companies for a market recovery in Europe. “Nova Chemicals’ European styrenics business has been the weakest performing area of Nova Chemicals for a number of years,” he says. The venture expects to have leading European market shares in solid polystyrene (25%) and expandable polystyrene (28%).

Lipton expects to generate annual savings of at least $40 million through reduced administrative and purchasing costs. In addition, he says, the partnership will trim product lines and may also rationalize manufacturing capacity.

Separately, BP says it will contribute its Grangemouth, Scotland, and Lavra, France, oil refineries to the olefins and derivatives business because the refineries are closely integrated with the to-be-spun-off unit.