Russian firms merge to create top-five petrochemical business

Taif Group, the world’s largest producer of isoprene and the Russian Federation’s largest rubber producer, has entered into an agreement with Russian integrated petrochemical company Sibur that finalises the creation of a combined entity that will leverage the facilities of Sibur Holding and create the largest petrochemical company in Russia and one of the biggest in the world.

Under the agreement, Taif shareholders will receive a 15 per cent stake in the new combined company in exchange for a 50 per cent plus one share in Taif Group. To ensure faster integration and higher efficiency of the combined entity’s operations and investment programme, the parties have agreed on an early exercise of an option for the remaining stake of Taif’s shareholders.

Sibur’s financial obligations in the second phase of the transaction will be secured by several issues of exchange-traded bonds. As a result, upon settling matters required to finalise the deal, the combined entity will consolidate 100 per cent of Taif Group’s shares, consisting of petrochemical and energy enterprises, consolidating these within the newly merged entity.

Stronger position & economies of scale

The stated aim of creating the merged company is to strengthen Russia’s position in the chemical, petrochemical and oil and gas markets, to increase the competitiveness of domestic products on global markets through economies of scale and to increase production efficiency, improving sales processes and the quality of customer service to a level comparable to the best international practices.

Following the completion of all ongoing investment projects, the new combined company will be among the top five producers of polyolefin and rubber globally. Its investment programme will drive further growth of chemical non-commodity exports and import substitution, and also unlock new ways of tackling sustainability and environmental challenges. The deal also facilitates the efficient distribution of feedstock, which will boost Tatarstan’s petrochemical cluster and pave the way for new partnerships with the region.

Laying the groundwork for global leadership

“This combination of industry leaders represents a significant step in the evolution of the Russian petrochemical sector,” states Dmitry Konov, chairman of Sibur Holding’s Management Board. “We are combining our competencies, energy and ambition to lay the groundwork for what is sure to become a global leader.”

Albert Shigabutdinov, chairman of Taif Group’s Board of Directors, adds: “One of the key elements of the deal is Taif Group’s US$20 billion Strategic Development Programme. Combine that with the development programme that Sibur is already running in Western Siberia and the Far East, and it is safe to say that the new company will hit its targets. We definitely have to work hard, but our goal is to create a completely new and strictly performance-oriented corporate culture drawing on Taif’s and Sibur’s best practices.”

“Today Taif Group is entering a new stage of its development,” comments Ruslan Shigabutdinov, general director of the Taif Group. “The combination of our petrochemical businesses with Sibur will enable the new company to assert its leadership in the global market and become a top-five global petrochemical producers. To achieve global leadership, we will have to work together, share positive experience and draw on the best practices of the two companies. I am convinced that joining forces of Taif Group’s and Sibur’s professional teams will help us achieve the goals we have set for ourselves.”

As part of the merger process, Rustam Minnikhanov, President of Tatarstan, and Leonid Mikhelson, chairman of Sibur Holding’s Board of Directors, also signed a cooperation agreement between Sibur and Tatarstan’s government. The parties have agreed to work together towards boosting Tatarstan’s economic strength and creating a favourable investment climate in the region.