MOSCOW (MRC) - The deal to merge SIBUR and TAIF, announced by the companies on April 23, could solve the strategic problems of both companies, Kommersant reports.
Thus, TAIF experienced problems due to a lack of raw materials and the pressure of a huge investment program of 1.5 trillion rubles, while SIBUR ran out of ideas for new large investment projects. Analysts estimate the synergy from the merger at the first stage at a minimum of several tens of millions of dollars per year. The main risk is still obtaining consent to the deal from the FAS.
Potential synergy from the merger of SIBUR and TAIF in the conservative scenario could amount to several tens of millions of dollars in EBITDA per year. A synergistic effect can be achieved by optimizing supplies between the domestic market and exports and a more diversified resource base. The increase in capacity will make it possible to simultaneously produce many brands, in which customers are interested.
SIBUR is the largest Russian manufacturer of petroleum and gas chemistry. TAIF is a large producer of polymers and synthetic rubbers, its key enterprises are Nizhnekamskneftekhim (NKNKH) and Kazanorgsintez (KOS). It is assumed that at the first stage of the merger deal, SIBUR will receive a controlling stake in TAIF in exchange for 15% of its own shares.
The problem of raw materials became quite acute for TAIF last year, when the amount of associated petroleum gas decreased due to a decrease in oil production. In addition, "with an increase in the load of NKNK's polymer capacities, there is a decrease in supplies from SIBUR due to its reorientation to its own complex in Tobolsk," said in July 2020 the head of Tatneftekhiminvest-holding (owned by the authorities of Tatarstan and TAIF) Rafinat Yarullin. One of the main shareholders of TAIF, Albert Shigabutdinov, said on April 23: "The main thing is that from today we are guaranteed to be provided with high-quality raw materials, which were lacking like air."
"Strategically, the deal gives us access to the processing of heavier feedstocks, mainly naphtha, which can provide more product options. Light feedstock gives a good economy on a limited range of products, mainly polymers. Integration with oil refining provides a much wider choice," said the head SIBUR Dmitry Konov.
"For us, the approved investment program of TAIF is new good opportunities. Another plus of the investment program of TAIF is that a significant part of it has already been invested," says Dmitry Konov. He stressed that SIBUR undertakes to continue those TAIF projects that "are already underway and will definitely be completed." On other projects of TAIF's investment program, "we have agreed on a unified methodology for assessing their economic efficiency and making decisions on implementation."
The main risk for the deal is obtaining an approval from the FAS, given that the merged company will become a de facto monopoly on the petrochemical market in the Russian Federation. In the practice of the Russian regulator, refusal to approve a deal is relatively rare, says Georgy Kalashnikov, head of corporate and financial practice in Russia / CIS Hogan Lovells. The regulator prohibits the transaction only if competition is significantly limited and there is a complete monopolization of the market, he says. FAS also has the right to exclude a certain line of business from the perimeter of the transaction and prescribe behavioral restrictions. Ivan Kozhemyakov, head of corporate practice at the A1 Bar Association, adds that the parties to the transaction will have to fulfill the terms of the transaction approved by the FAS within nine months.
Earlier it was reported that SIBUR increased sales of polypropylene and polyethylene last year amid growing utilization of the ZapSibNeftekhim complex. This led to an increase in the company's revenue in the olefins and polyolefins segment by 77.1% to RUB 187.3 billion. This growth was mainly due to an increase in sales of polypropylene and polyethylene as a result of increased utilization of the ZapSibNeftekhim complex and was partially offset by a decrease in prices for these types of products.
SIBUR is the largest vertically integrated gas processing and petrochemical company in Russia, uniting a number of production sites in various regions of the Russian Federation. The company sells products to consumers in the fuel and energy complex, automotive, construction, consumer goods, chemical and other industries in more than 80 countries around the world.
PSC "TAIF" was established in 1995, is the parent company of the group of the same name, which includes enterprises structured in four business areas: oil and gas processing, chemistry and petrochemistry (energy); investment and financial services; building; telecommunications and complex services, including trade. TAIF Group of Companies is a large Russian holding that controls 96% of the chemical, petrochemical and oil and gas processing industries in Tatarstan. The most important of its areas is the Chemistry, Petrochemistry and Oil and Gas Processing Division, which includes the leading Russian polymer producers Nizhnekamskneftekhim and Kazanorgsintez.