A Methanex Corporation plant is seen in Medicine Hat, July 16, 2018. Methanex will be paying US$1.15-billion in cash, issuing US$450-million in Methanex shares and assuming OCI’s US$450-million in debt and leases.Handout ./Reuters
Methanex Corp. MX-T of Vancouver is buying Amsterdam-based OCI Global’s international methanol business in a US$2.05-billion deal that expands the Canadian-based company’s U.S. presence.
In its purchase of assets, Methanex will be paying US$1.15-billion in cash, issuing US$450-million in Methanex shares and assuming OCI’s US$450-million in debt and leases.
OCI will end up owning a 13-per-cent stake in Methanex, subject to the deal receiving approval from regulators.
“We are pleased with the opportunity to achieve a significant ownership position and are highly confident in Methanex’s ability to create enduring value for shareholders,” OCI executive chairman Nassef Sawiris said in a statement.
The deal came after OCI launched a strategic review in the spring of 2023 of its methanol assets, said Mr. Sawiris, an Egyptian billionaire who co-owns the Aston Villa FC soccer team in England’s Premier League.
Methanol is a basic chemical building block made from natural gas. Methanex is a major producer and marketer of methanol, which is used to manufacture formaldehyde, a resin in particleboard, and also goes into the production of reformulated gasoline, among many other uses in chemical products.
“We’re inclined to view the deal as both strategic and attractive,” Raymond James Ltd. RJF-N analyst Steve Hansen said in a research note on Monday about Methanex. “The obvious trade-off is the company’s long-awaited buyback plan is likely now shelved.”
The transaction features OCI’s stake in two methanol plants in Beaumont, Tex., including one that also produces ammonia.
“The Beaumont plants benefit from access to North America’s abundant and favourably priced supply of natural gas feedstock,” Methanex chief executive officer Rich Sumner said in a news release.
Scotia Capital analyst Ben Isaacson said the assets to be purchased include a 50-per-cent stake in the Natgasoline facility in Beaumont.
“We believe Methanex is the natural owner of these assets, given how well the two portfolios fit. OCI started a strategic review 18 months ago, meaning the opportunity to consolidate the methanol market in low-risk jurisdictions is unlikely to have appeared again any time soon,” Mr. Isaacson said.
The transaction is slated to close in the first half of 2025 and provide a 20-per-cent boost to Methanex’s methanol production globally. Deutsche Bank and RBC Capital Markets served as Methanex’s financial advisers on the deal.
A legal dispute between OCI and Proman USA, the joint venture partner in Natgasoline, over shareholder rights has yet to be resolved. Methanex has the ability to carve out the Natgasoline portion of the transaction, if the dispute lingers.
On Monday, debt-rating agency Moody’s placed the Vancouver-based company’s ratings under review for downgrade. “Post transaction, we expect Methanex to allocate free cash flow toward debt repayment,” Moody’s said.
Shares in Methanex fell 8 per cent to close at $53.04 on Monday on the Toronto Stock Exchange.
The latest deal includes a methanol plant in the Netherlands, but the facility has been idle since 2021. OCI HyFuels, a producer of low-carbon methanol, also will be part of the transfer of various assets.
Methanex employs about 1,450 workers and stands to add another 280 employees after the transaction closes. There are also nearly 150 workers at Natgasoline.
Methanex’s current North American assets include the Medicine Hat plant in Alberta and Geismar facility in Louisiana, which are among an array of locations worldwide, including in Chile and Egypt.
Citing high prices for natural gas at the time, the company closed its methanol plant in Kitimat, B.C., in 2006. The industrial site is now being used by LNG Canada to build its terminal for exporting liquefied natural gas to Asia, starting shipments by mid-2025.
The chair of Methanex is Doug Arnell, who is CEO at Cedar LNG, an energy project to be built in Kitimat and aiming to start shipping LNG to Asia in late 2028. The Haisla Nation has a 50.1-per-cent stake in Cedar while Calgary-based Pembina Pipeline Corp. owns 49.9 per cent.