BP to sell chemical unit Innovene in US$9bn cash deal

BP on Friday it would sell its chemical division Innovene to Ineos, a private British company, for US$9 billion in cash, instead of spinning off the unit in an initial offering.

BP it planned to return the proceeds to shareholders. Early this week, BP warned that damage from hurricanes on the Gulf Coast would cut its third-quarter profit by US$700 million.

With the sale, BP exits the business of manufacturing olefin and derivatives, which are byproducts of petroleum that can be used to make plastic. BP created Innovene in April last year in anticipation of a public offering. Major oil companies have been selling their petrochemical divisions since the late 1990s.

BP's executive, Lord E. John P. Browne, said in a statement that the deal was "the very best of a number of good offers." Since BP said last year that it planned to take Innovene public, several trade buyers have expressed interest in the group.

The deal, which is expected to close early next year, will more than double Ineos' employees to 15,000 and quadruple revenue to US$24 billion.

Innovene 19 plants in the US and Europe and includes 412,000 barrels a day of crude-oil refining capacity.

Ineos executive James Ratcliffe, who led the buyout, called the deal a "transformational acquisition." Ineos is borrowing 9.8 billion euros or US$11.9 billion from banks to finance the deal.