Oil giant BP has today agreed to sell its petrochemicals business to Sir Jim Ratcliffe’s Ineos for $5bn (£4.05bn).
Under the deal, Ineos will acquire the supermajor’s aromatics and acetyls operations, which produce a combined 9.7bn of petrochemical products per year at 14 facilities around the world.
Ineos will pay a $400m deposit for the deal, with $3.6bn to follow once the purchase has been completed.
The remaining $1bn will be deferred, with full payment expected by June next year.
BP’s chief executive Bernard Looney said that the deal was the next step in the “reinvention” of the company, after announcing 10,000 job cuts earlier this month.
The company is currently undergoing a wholesale restructuring as it seeks to turn itself into a net zero emissions business by 2050.
He said: “This is another significant step as we steadily work to reinvent BP.
“Strategically, the overlap with the rest of bp is limited and it would take considerable capital for us to grow these businesses.
“As we work to build a more focused, more integrated bp, we have other opportunities that are more aligned with our future direction.
“Today’s agreement is another deliberate step in building a bp that can compete and succeed through the energy transition.”
The deal comes shortly after BP announced that it would write off up to $17.5bn after the spring’s oil price crash, and means that it has now completed its $15bn divestment plan a year ahead of schedule.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “The oil price collapse has made BP’s disposal programme all the more important, providing cash to support the currently unaltered dividend programme and fund future investment.
“While the sale of a sizeable chunk of the downstream business is a surprise, in the current conditions it will have been easier to secure an attractive price.
“Having completed its $15bn disposal programme ahead of schedule and largely resolved the Deepwater Horizon legacy issues we would expect the September Capital Markets to mark a new era for the group”.
It is not the first time that the two firms have done business. Back in 2005 Ineos also acquired Innovene, one of BP’s refining businesses, for $9bn.
BP finance chief Brian Gilvary, who brokered the deal, said the sale was strategic for both parties.
“BP has had a long relationship with Ineos and this agreement reflects the mutual respect and trust that exists between us” he said.
“It is a strategic deal for both parties that recognises both the high quality of the businesses and that Ineos is in many ways a natural owner for them.”
The 1,700 staff who currently work in the two divisions are expected to be taken on by Ineos after the purchase.
Shares in BP rose on the back of the announcement, increasing three per cent over the morning’s trading.
Read more: BP set to axe 10,000 jobs due to coronavirus
However, The Share Centre’s Ian Forrest said that shares were likely to remain “volatile” due to worldwide economic uncertainty.
“While this deal is a good one and should help the company to reduce its relatively large debts, the news needs to be seen alongside the company’s recent reduction in its long-term expectations for the price of Brent crude”, he said.
“Dividends could be cut in early August when second quarter results are due.”