Jim Ratcliffe’s Ineos doubles down on European chemical sector shares
Company and its investors have bought more than €400mn of equities in listed peers while some of the group’s bonds trade at a discount
Sir Jim Ratcliffe’s chemicals conglomerate Ineos and its shareholders have doubled down on listed shares in European chemical companies, underlining their view that the sector was undervalued.
Ineos Quattro, one of two holding groups the privately held chemicals giant uses to issue debt, last week told investors that it had placed its own €200mn bet on selected chemical companies, according to people familiar with the matter.
The chemical group’s three shareholders have also made a similar investment, according to people familiar with the matter, although they did not disclose the size.
Together with the €200mn purchase disclosed in May of a “basket of publicly traded liquid equities related to the chemical industry”, Ineos and its shareholders have invested more than €400mn in its chemicals sector peers, according to the people.
The share purchases have drawn the ire of some Ineos creditors who have questioned why the cash was not used to buy back their debt, particularly when some of Ineos’s bonds have been trading at a discount. The group owes investors $19bn.
“The market was frustrated they didn’t buy back bonds,” said one credit investor that holds Ineos’s debt. They added that it suggested that “both management and the shareholders are finally seeing recovery in a market that has been in a four-year downturn”.
While the price of Ineos’s bonds and loans fell for much of last year, the US and Israel’s war on Iran has been a source of reprieve for the group as well as some of its peers. The near closure of the Strait of Hormuz has cut supply from Asia and the Middle East, increasing prices of chemical products and margins.
Ratcliffe, who co-owns football club Manchester United, built Ineos by making a number of bold acquisitions in unloved sectors. He has been a forceful proponent of the European chemical industry, despite its waning profitability in recent years.
One of Britain’s richest people, Ratcliffe owns a controlling stake in the group while lieutenants Andy Currie and John Reece each hold a roughly 20 per cent stake.
“The ultimate shareholders of the group believe that chemical producers are currently undervalued,” Ineos Group said in private bond offering documents shared with investors in May, as part of a €700mn debt issuance earlier this month.
“As such, the group has invested approximately €200mn in an exposure to a basket of publicly traded liquid equities related to the chemical industry,” it said, adding that it may increase its exposure to those equities and could purchase shares in other companies related to the sector.
Europe’s chemicals producers have struggled in recent years with a deluge of cut-price imports from China, high energy prices and tougher environmental regulations on top of overcapacity and weak demand across the globe.
“We believe the market is significantly undervaluing the chemical industry,” Ineos said, adding that the group had “a strong balance sheet, substantial liquidity and a disciplined approach to capital allocation”.
“We constantly assess the best use of capital across the business, balancing debt management, liquidity and investment opportunities,” it said.