LyondellBasell and Sasol Ltd. have entered into a definitive agreement to form a 50/50 joint venture (JV) through which LyondellBasell will acquire 50% of Sasol’s Lake Charles base chemicals unit for a total consideration of $2 Billion.
The Lake Charles base chemicals unit includes a 1.5-million-ton ethane cracker, 900,000-ton low and linear-low density polyethylene plants and associated infrastructure.
The agreement includes customary rights for each partner regarding the potential future sale of its ownership interest. The JV will operate under the name Louisiana Integrated PolyEthylene JV LLC.
“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,” said Bob Patel, CEO of LyondellBasell.
“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,” said Fleetwood Grobler, President and CEO, of Sasol.
The JV’s newly constructed assets are strategically located on the U.S. Gulf Coast, with access to low-cost feedstock, storage and logistics infrastructure.
LyondellBasell’s investment in the JV allows the company to expand in a core area of its business and leverages the company’s operational and commercial strengths. Additionally, by investing in these assets, the company will realize immediate returns and eliminate customary construction risks associated with new project execution.
Under the terms of the transaction agreements, each JV partner will provide pro-rata shares of ethane feedstocks and will offtake pro-rata shares of cracker and polyethylene (PE) products at cost. LyondellBasell will operate the U.S. Base Chemicals assets on behalf of the JV.
Upon close of the transaction, Sasol will retain full ownership and operational control of its Lake Charles Research and Development complex, Lake Charles East Plant ethane cracker and U.S. Performance Chemicals Business assets in Lake Charles, which produce Ziegler alcohols and alumina, ethoxylates, Guerbet alcohols, paraffins, comonomers, linear alkyl benzene, ethylene oxide and ethylene glycol.
The U.S. Performance Chemicals Business is a key part of Future Sasol, consistent with the strategy to increase focus on specialty chemicals where Sasol enjoys differentiated capabilities and strong market positions. Sasol will also retain access to competitively priced onsite ethylene to ensure value chain integration.
The transaction is subject to customary regulatory approvals and approval by Sasol shareholders. The transaction is expected to close by the end of 2020.
Kirkland & Ellis LLP is serving as LyondellBasell’s legal counsel, while Gordon Dyal & Co. and J.P. Morgan are serving as financial advisors. Latham & Watkins LLP is serving as Sasol’s legal counsel, while Bank of America is serving as financial advisor.