LyondellBasell, Sasol to create polyethylene joint venture in US

LyondellBasell and Sasol have agreed to create a 50:50 joint venture (JV) under which the former will acquire a 50% stake in the latter’s 1.5 MM ton ethane cracker, 0.9 MM ton low and linear-low density polyethylene plants, and associated infrastructure in Louisiana, US for $2 billion.

The deal includes customary rights for each partner pertaining to the potential future sale of its ownership stake.

The joint venture will operate as Louisiana Integrated PolyEthylene JV.

Bob Patel – CEO of LyondellBasell said: “This investment represents a unique opportunity to bring together the best of both companies and create deep, long-term value while immediately realizing the many benefits of new, strategically-located, world-scale assets.

“This approach is consistent with our strategy of investing in high quality assets that meet our threshold for value creation, while also maintaining our investment grade rating and commitment to our dividend. The transaction is expected to be accretive to both cash flow and EPS within one year with significant upside as market conditions continue to improve.”

The newly constructed assets of the joint venture are said to be located strategically on the US Gulf Coast. They will have access to low-cost feedstock, storage, and logistics infrastructure.

The investment of LyondellBasell in the polyethylene joint venture is said to enable the company to grow in a core area of its business. The joint venture will leverage the operational and commercial strengths of LyondellBasell.

By investing in the assets, the Dutch chemicals company is expected to realize immediate returns and remove customary construction risks pertaining to new project execution.

Dutch chemicals company LyondellBasell to acquire 50% stake in certain Sasol assets in Louisiana. Photo courtesy of LyondellBasell Industries Holdings B.V.

According to Sasol, the deal marks a major step in achieving its financial and strategic goals by cutting down net debt and quickly shifting its portfolio towards specialty chemicals.

The South African chemicals company had carried out a process to determine the optimal partnership construct for its base chemicals business in the US. Sasol said that the proposal from LyondellBasell provided the best combination of upfront and long-term value, in line with its long-term strategic priorities.

Fleetwood Grobler – President and CEO of Sasol said: “We are very pleased to have LyondellBasell join us as a key partner in our U.S. Base Chemicals Business in Lake Charles. LyondellBasell is the ideal partner to ensure the success of these world-class assets with its deep expertise in commodity chemicals.

“This milestone coincides with our 70-year anniversary and represents a significant step in creating Future Sasol, which will be a more sustainable and resilient business for the long-term. We’re excited about this joint venture and look forward to building a mutually beneficial and successful partnership with LyondellBasell.”

After the closing of the deal, certain Sasol US employees will become employees of the Dutch chemicals company.

Sasol will retain total ownership and operational control of its Lake Charles Research and Development complex, Lake Charles East Plant ethane cracker, and also US Performance Chemicals Business assets across Lake Charles, which produce Ziegler alcohols and alumina, paraffins, comonomers, ethoxylates, Guerbet alcohols, ethylene oxide, linear alkyl benzene, and ethylene glycol.

The deal, which is subject to receipt of customary regulatory approvals and approval by Sasol’s shareholders, is anticipated to close by the end of this year.