BP is selling its global petrochemicals business to billionaire Sir Jim Ratcliffe for $5bn (£4bn) as the oil titan continues its push away from fossil fuels.
Chief executive Bernard Looney said the sale to Sir Jim's firm Ineos means it will meet asset sales targets a year ahead of schedule while strengthening the company's balance sheet.
The division includes two main businesses – aromatics and acetyls – across 14 plants in Europe, Asia and the US that produced almost 10 million tonnes of petrochemicals last year. They make ingredients for everything from soft drink bottles to carpets.
The deal is expected to be completed by the end of this year assuming it is signed off in time by regulators.
Ineos will pay a deposit of $400m for the business and a further $3.6bn when the deal completes. The final $1bn will be paid in instalments by June 2021.
Founded by Sir Jim in 1998, the firm has long sought to snap up businesses during downturns using its financial firepower. This deal is one of its biggest acquisitions yet.
The purchase of BP's assets will mean Ineos extends its reach into polyester, allowing it to produce products such as clothing fabrics, while expanding its operations in Asian markets including China and South Korea.
Ineos spent £9bn on a number of BP's petrochemicals facilities in 2005, a transformative deal which formed the basis of an empire that now also encompasses leather jacket maker Belstaff, Swiss football club FC Lausanne-Sport and a 4x4 car maker in Bridgend, South Wales.
At the time, BP refused to sell a handful of its remaining petrochemicals assets to Ineos – but 15 years later it has reversed that opposition as it seeks to scale back its stake in carbon-intensive operations.
Sir Jim, one of Britain's richest people with an estimated £12.2bn fortune, said: "We are delighted to acquire these top-class businesses from BP, extending the Ineos position in global petrochemicals and providing great scope for expansion and integration with our existing business."
Analysts at Berenberg said that while they still expect BP to follow in rival Shell's footsteps by cutting its payout to shareholders this quarter, the sale could allow the dividend to be maintained.
Meanwhile, analysts at Credit Suisse said the deal highlights BP's continued transition away from oil.
They said: "Bottom line, BP is moving step by step forward to reinvest itself."
However, they warned that further investment will be needed to increase its low-carbon operations.
In February soon after he took over as chief executive, Mr Looney laid out plans to reduce BP's reliance on fossil fuels and achieve net zero carbon emissions by 2050.
He said: "Strategically, the overlap with the rest of BP is limited and it would take considerable capital for us to grow these businesses. Today’s agreement is another deliberate step in building a BP that can compete and succeed through the energy transition."
The deal means BP has now agreed $15bn of asset sales since the start of 2019 – a figure not expected to be reached until mid-2021.
It comes after the company announced plans to cull 10,000 jobs earlier this month and slashed its long-term forecast for oil and gas prices.
Oil companies are striving to shore up their finances after coronavirus lockdowns destroyed global demand for crude.
The petrochemicals businesses included in the sale employ 1,700 staff worldwide and are expected to transfer to Ineos.
Shares in BP closed 3.4pc higher at 314.9p, valuing the company at £64bn.