Abu Dhabi state-owned International Petroleum Investment Co launched a $500 million takeover of Nova Chemicals Corp
Nova shares, which had lost 95 percent of their value as industry conditions worsened over the past year, quadrupled to C$6.76 on the Toronto Stock Exchange after the firms announced the deal. Nova's New York-listed stock surged $4.06, or 303 percent, to $5.40.
IPIC will offer $6 a share for Nova. With assumed debt, the deal is valued at $2.3 billion.
The stock has been beaten down as demand for commodity chemicals -- used to make everything from food packaging to building materials to electronics components -- withered with global economies. Investors fretted over the company's ability to meet its debt obligations.
Nova Chief Executive Jeff Lipton said the company, which has operated independently for 11 years, had pored over several options to remain afloat before agreeing to be bought by IPIC.
Lipton, known for his unbending optimism about the chemical industry, said demand for products has increased, but investors remained fixed on Nova's financing struggles.
Having been through it, I would tell you the banks, the markets, the financial world are in real turmoil, he told analysts. But if you can find investments that, once they get beyond the issues -- and most of them will -- have truly outstanding fundamentals, it seems to me that you ought to be thinking about that as investors and not just the short-term concerns.
The deal will allow Nova to strengthen its balance sheet so it can keep operating and expanding, the companies said. IPIC agreed to give Nova a $250 million backstop facility to improve its liquidity.
Meanwhile, Nova won a new $150 million credit facility with Export Development Canada on Sunday, allowing it to meet a key debt commitment before month-end.
Nova has plants in Canada, the United States and Europe that make ethylene, polyethylene, styrene and its derivatives. It is based in Canada but has its executive offices in Pittsburgh, Pennsylvania.
IPIC said Nova's assets will complement its own in Europe, the Middle East and Asia.
The deal marks the latest in a string of Canadian acquisitions for Abu Dhabi companies, although most have been in the oil and gas production business.
Nova's marquee asset is the Joffre ethylene and polyethylene complex in central Alberta, one of the world's largest. It is seen as strategically key because of a low-cost supply of the feedstock ethane.
Lipton estimated that facility is worth $5 billion alone.
The company began as part of Nova Corp, which brought together Alberta's huge natural gas pipeline network and the petrochemical operations. It was split off in 1998 when TransCanada Corp
Over the past month, several bond rating agencies downgraded Nova debt over fears that it may not be able to meet its obligations to lenders. The Alberta government said early this month it would not give Nova emergency aid.
However, Mel Knight, the province's energy minister, said the industry remained key to Alberta's strategy of wresting more economic value from its vast oil and gas resource.
The deal is subject to holders of two-thirds of Nova shares tendering to the offer.
(Additional reporting by Scott Anderson; editing by Rob Wilson)