Berenberg downgrades OCI, says divestment cycle nearing end
The Dutch chemicals firm has been spinning off major assets, including its fertilizer, methanol, and ammonia businesses, returning roughly $4.4 billion to investors so far. Following shareholder approval at its May annual meeting, OCI plans an additional $1 billion payout once the sale of its methanol unit to Methanex (NASDAQ:MEOH) closes, expected in the first half of 2025.
Berenberg expects that after completing the handover of its Texas Clean ammonia project to Woodside (OTC:WOPEY) Energy in late 2025, OCI's majority shareholder, the Sawiris family, could launch a tender offer for the remaining shares at a modest premium.
'The company is approaching a liquidation moment, with OCI's main shareholders willing to delist the shares,'' Berenberg wrote, adding that once the Methanol deal is finalised, management may also pursue a sale of its remaining European nitrogen assets. However, the brokerage noted that finding a buyer could be challenging as key players like Yara and Grupa Azoty are scaling back EU operations.
OCI's residual assets would consist of the nitrogen unit, which includes a 1.2 million tonne per annum ammonia terminal in Rotterdam and 1.6 million tonne ammonium nitrate capacity, and a 14.5% equity stake in Methanex.
Berenberg sees limited catalysts for further value creation, cutting its price target to €8.70 to reflect the May 7 distribution. It values the company based on a sum-of-the-parts analysis, factoring in expected transaction and restructuring costs of $300 million and estimating a partial recovery from contingent payments tied to the Fertiglobe deal.
The bank expects US regulatory approval of the Methanol sale, though with some remedies to address market concentration concerns.
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