Abu Dhabi snaps up Nova Chemicals

Nova price right.jpgNova’s CEO, Jeffrey Lipton, has always been the great optimist of the petrochemical industry. As recently as December, he was arguing at the GPCA meeting that “demand forecasts will prove to be too low”, and forecasting a shortage of ethylene and polyethylene in 2012.
However, optimism isn’t a business strategy, particularly when it leads to over-leveraging the business. As the chart shows, Nova’s shares had fallen 95% since September. According to Bloomberg, Nova needed “to secure $100 million in additional financing by Feb. 28 and $100 million more by June 1”. So yesterday, Nova was instead forced to accept a $2bn offer from Abu Dhabi’s IPIC. Lipton himself acknowledged that “it was pretty clear that this was the best alternative, you have to deal with today”.
Nova’s strategic mis-step is Abu Dhabi’s gain. Nova benefits from advantaged feedstocks in the shape of Albertan ethane, has several excellent facilities and a highly professional workforce. With a sensible debt structure, it should now survive the present downturn. It should also be complementary to IPIC’s existing investments in Borealis and OMV. The blog wishes Nova well under its new owner.

1 thought on “Abu Dhabi snaps up Nova Chemicals”

  1. I left NOVA’s employ two years ago after 24 years. The eternal optimism of Jeff Lipton has come at great cost to many current and former employees of NOVA. He, however, seems to have weathered the storms and somehow profited when others have incurred significant losses. I wish NOVA Chemicals and it’s employees world-wide, better days under what is sure to be better leadership!

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