Odd Merger: Middle East & Chemicals, Redux (NCX, ROH, DOW)

Nova Chemicals Corp. (NYSE: NCX) is the largest percentage winner on the NYSE today.  It is up about 300%.  Yep 300…  The company is being acquired in a deal involving the Middle East.  Does this sound familiar?

The merger involves International Petroleum Investment Company acquiring Nova Chemicals for US$6.00 per share by way of a court-approved plan of arrangement in Canada.  The value of the deal including debt is roughly $2.3 billion.  IPIC has also agreed to a US$250 million credit backstop facility to provide the company with sufficient liquidity.  This deal is not subject to any financing conditions.

IPIC is wholly owned by the Government of the Emirate of Abu Dhabi.  It might not be fair to compare this to the failed Dow Chemicals (NYSE: DOW) deal with the Kuwaitis.  But that is hard to forget what implications that had on the buyout of Rohm & Haas (NYSE: ROH) by Dow.

Nova was in the gutter already as its shares were at $1.34 Friday.  Even at $6.00, this is down over 80% from last year’s high of $32.46.  This deal is going to be great for those speculators who piled in on the hope of something happening.  And it is going to lock in some major losses for long-term investors who held on.

This might be a small deal.  At least it shows that sovereign wealth funds are not completely out of the picture.

Jon C. Ogg
February 23, 2009