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Sasol agreed to sell a $ 2 billion stake in its US basic chemicals business to LyondellBasell Industries to help pay off the debt.
The unit will become a joint venture between the Johannesburg-based company and the US chemical giant, Sasol said in a statement on Friday. The deal is subject to shareholder vote and is expected to be completed this year.
Sasol has been looking to cut lending after a series of cost overruns and delays at its Lake Charles chemicals project in Louisiana were exacerbated by a historic defeat in the oil market. The deal will reduce debt to around $ 8 billion from $ 10 billion, the company said, based on the sale of other assets such as the sale last month of an air separation unit to Air Liquide SA for R8.5 billion.
“This sale was widely anticipated and the $ 2 billion price tag is broadly in line with our assessment,” Morgan Stanley analysts led by Christopher Nicholson said in a note to clients.
Offer of rights
Along with the asset sale plan, Sasol is considering a rights offer of up to $ 2 billion before the end of June, even after saying the move is a last resort. “This, if implemented, would allow Sasol to operate sustainably within the thresholds of its agreement,” the company said, adding that the timing and amount to increase would be dictated by the market.
Lake Charles was approved in 2014 at an estimated cost of $ 8.1 billion, but it has overcome the company’s worst-case scenario and is now expected to cost $ 13 billion. The debacle cost former co-CEOs Bongani Nqwababa and Stephen Cornell their jobs after an investigation uncovered mismanagement in the plant’s development. They were replaced late last year by Fleetwood Grobler.
The new joint venture will focus on the production of basic chemicals, including ethylene and polyethylene, according to the group. For LyondellBasell, the deal is expected to add to cash flow and earnings within a year “with a significant advantage as market conditions continue to improve,” Chief Executive Officer Bob Patel said in a separate statement.
