Billionaire Ratcliffe Hunts Oil to Repeat Chemicals Empire

Billionaire Jim Ratcliffe is seeking to replicate in oil what he did two decades ago to make Ineos AG into one of the world’s five biggest chemicals producers.

The deal to buy assets from Dong Energy A/S for more than $1 billion follows the purchase of a pipeline system from BP Plc that carries crude used to price more than half the world’s oil. The closely held company plans more acquisitions, primarily in the North Sea, Tom Crotty, a director at Ineos, said in an interview on Wednesday.

Ratcliffe, 64, a former Exxon Mobil Corp. chemical executive, built Ineos by acquiring unwanted petrochemical assets. After almost succumbing to its debt load during the 2008 financial crisis, the company’s fortunes have been restored as cheap U.S. shale gas provided affordable feedstock and Ratcliffe targeted investments in petrochemicals and polymers that had fallen out of favor. In much the same way, he is now rolling up assets in the North Sea.

“We see the opportunity to do in oil and gas what we did in chemicals 20 years ago, which is to buy assets from people who don’t really want them anymore,” Crotty said. “This won’t be the last deal that we do by any means. We are looking hard at the North Sea but could be elsewhere as well.”

Ratcliffe spent time with private-equity firm Advent International before targeting unwanted assets from oil companies including BP and Chevron Corp. Ineos chemicals are used in products from auto parts to vaccines and wind-turbine blades.

Pipeline Purchase

Ineos in April agreed to pay BP $250 million for its entire stake in the Forties pipeline system, one of the most important pieces of oil infrastructure in the U.K. North Sea. Ineos said the purchase made sense as the line carried oil to its Grangemouth refinery.

Even more importantly, about 40 percent of the U.K.’s oil production flows through the system, including crude used to set Dated Brent, the global pricing benchmark. Ownership of the pipeline and associated terminals will give Ineos “very helpful” intelligence, John McNally, the company’s transition manager for the deal, said April 3.

The Dong deal is the latest orchestrated by Ratcliffe, the U.K.’s fourth-richest person with a net worth of $5.6 billion, according to Bloomberg Billionaires Index. The Danish company will divest the entire share capital in its exploration and production unit to Ineos for an unconditional payment of $1.05 billion, on a cash and debt-free basis, and a contingent payment of $150 million related to a stabilization plant in Denmark.

The deal also includes a contingent payment of as much as $100 million, subject to the development of the Rosebank field, Ineos said. The acquisition won’t affect Dong’s liquefied natural gas and trading businesses, the company said. It will result in the loss of 115 to 135 jobs in Denmark.

Making Money

The Dong assets are making money at current oil prices, Crotty said. About 70 percent of the production from the assets is in the Norwegian North Sea and 15 percent each in the U.K. and Denmark, he said.

“The thing that makes us confident is experience, which is very similar to what we had in petrochemicals,” Crotty said. “Twenty years ago people would’ve asked why we are buying these unloved, unwanted chemical assets that aren’t making much money for the likes of BP. The answer was we think we can make them profitable, and we have.”

Dong said that JPMorgan Chase & Co. was its exclusive financial adviser on the deal. The acquisition, which still requires regulatory approval, is expected to go through in the third quarter, it said.

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