OMVJF - OMV AG: ADNOC Deal Could Unlock Significant Value

2024-01-22 23:48:29 ET

Summary

• OMV and Abu Dhabi National Oil Co. (ADNOC) are in advanced discussions for a deal involving OMV's 75% stake in petrochemicals company Borealis.
• The deal is likely to be a merger of Borealis and ADNOC-controlled Borouge, with an expected value of $30 billion.
• Under the reported merger terms, OMV is on track to end up with a stake in a combined valued in the vicinity of its current total market capitalization.
• OMV distributes a very attractive dividend, presumably yielding no less than 7 percent for FY2023.
• There are, however, certain risk factors to be considered, particularly with regard to certain Middle East operations of the energy division.

Back in June of 2023, I identified OMV AG's ( OTCPK:OMVJF , OTCPK:OMVKY ) petrochemicals division as a potential takeover target for the UAE's Abu Dhabi National Oil Co. ("ADNOC"). As it turns out the two companies indeed entered discussions (although the deal is likely to be structured differently than what I initially envisioned). Below, I will give an update on recent developments and explain my investment thesis for OMV at the current price level....

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