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Mystery Man of Ineos Loses His Cloak of Invisibility

Posted on: Wednesday, 14 May 2008, 06:00 CDT

By Martin Hannan

PERHAPS the thing which bemused most Scots when the recent Grangemouth refinery strike began to occupy the headlines was the fact that the owners were no longer British Petroleum but a shadowy outfit called Ineos.

"What happened to good old BP?" and "they have to be foreign with a name like that", were the possible reactions of a great many people who were not au fait with the machinations at the upper end of the chemical industry. Yet Ineos is very much a British concern and the name isn't Greek or any other language but an acronym formed from INspec Ethylene Oxide Specialities.

Inspec was the name of the first firm set up by Ineos's majority owner and chairman Jim Ratcliffe, who was described as a publicity- shy tycoon out to grab the workers' pensions, raising the spectre of another Robert Maxwell, only without the bombast and belly. This was despite the fact that, on the face of it, Ratcliffe was simply proposing an end to new employees at Grangemouth gaining automatic entry to a final salary pension scheme, rather than attacking existing workers' assets.

The reaction of the workers at Grangemouth and their union Unite undoubtedly took Ratcliffe and his managers aback. It appears on the face of it that they misjudged the workers' strength of feeling on the issue of pension entitlements.

A man used to confronting bankers and managing directors and making mergers and acquisitions worth billions suddenly found himself dealing with hardened union negotiators - yet he will have brought formidable dealmaking skills to the table.

For Ratcliffe is, without doubt, a dealmaker supreme. In less than a decade, he has grown Ineos from a single petrochemical plant in Belgium to a global giant, the third largest chemical company in the world after Germany's BASF and Dow Chemical of America, and the biggest privately-owned company in Britain.

Ineos's growth has depended almost entirely on merger and acquisition. From a near standing start in 1998, Ineos now comprises 19 businesses, each with its own major chemical company heritage, in 20 countries across the world. The company boasts 76 manufacturing facilities and 16,600 employees producing 53 million tonnes of chemical and related products annually.

With a reported turnover of GBP 23 billion, Ineos is set to grow even further, even if Ratcliffe never buys another company. For his modus operandum is straightforward - use mostly debt to buy some or all of a reputable chemical company or its manufacturing capability, cut costs, invest in new plant and quickly push for bigger returns, always keeping profits ahead of debt interest payments.

At one point he seemed to be doing a deal a month, but the pace of his deals has slowed slightly in the last few months, suggesting Ratcliffe is consolidating the returns from his leveraged investments.

On a European basis, the sheer scale of the deals made by Ratcliffe dwarves just about every other individual entrepreneur's activities. In Scottish terms, arguably only Sir Fred Goodwin at the Royal Bank of Scotland has done bigger deals, as when he piloted through the purchase of Dutch banking giant ABN Amro.

But Goodwin was acting with his bank's money and the backing of the RBS board, whereas Ratcliffe has done almost every deal personally, backing his own instinct and using high levels of debt. In strict money terms, he is arguably the biggest British individual dealmaker of all time (see panel opposite).

So what kind of person does mergers and acquisitions on a seemingly year-round basis that would take most City high-flyers an age to put together? The first thing to know about Ratcliffe is that he is almost uniquely placed to have made the deals he did.

Born on 18 October, 1952, to Alan and Marie, Ratcliffe graduated with a BSc in chemical engineering from the University of Birmingham in 1974. He joined Esso and then Courtaulds, also taking an MBA at the London Business School before qualifying as a chartered management accountant.

As both a qualified chemical engineer and accountant, Ratcliffe began his dealmaking at a time when long-established chemical companies such as ICI and BP were rationalising and often selling prime assets, and when vast borrowings were not only allowed but encouraged. In short, he became the right man, in the right place, at the right time.

At the end of his spell with the venture capital firm Advent, in 1992 Ratcliffe led the buyout of a BP chemical plant at Hythe in Kent for GBP 40m and formed Inspec with partner John Hollowood. He was on his way.

Within a few years, Inspec had bought many more chemical businesses, including the BP plant at Antwerp where Ratcliffe decided to mount another buyout, this time for himself. He formed Ineos, and began the deals which would make him a legend, at least in business and petrochemical circles. That he has purchased so much from the great names of the chemical industry is seen by Ratcliffe as a plus, not a hindrance.

It is ironically apt that it took trouble at his only plant in Scotland to make Ratcliffe a national public figure, because there was a strong Scottish connection right at the start of his dealmaking career. It was Murray Johnstone, the Glasgow-based fund managers which was later subsumed into Aberdeen Asset Management, which provided a large amount of the funding for Ineos at the start.

One deal in particular made Ineos a giant and is illustrative of the Ratcliffe method. When BP formed Innovene, which included the refinery at Grangemouth and giant petrochemical works at Lavera in Southern France, they did so with the intention of floating it on the stock market.

Not long afterwards, Ratcliffe saw his opportunity and moved quickly and decisively. Just before the flotation in 2005, he effectively refinanced Ineos to offer BP a knockout GBP 5 billion for Innovene and his offer was accepted with alacrity - it was perhaps GBP 1bn more than they hoped to gain from the stock market. In one fell swoop, Ineos's revenues soared by a factor of four, and though the deal vastly increased the company's debt, it was the breakthrough which made Ineos one of the top world players in the chemical industry.

Ratcliffe once told a trade magazine that even he had been taken aback at the pace of his dealing: "To be truthful, I'm surprised at how quickly it has all happened. But if you're acquisitive, you can never predict how you're going to grow.

"A number of deals came together at the same time. It was a consequence of economic conditions and the eagerness of several companies to divest commodity-type businesses."

Unlike a dozen other entrepreneurs who have achieved much less than him, Ratcliffe doesn't do fame, press conferences, reality TV or talk shows, and he guards his privacy jealously. His few public utterances have included a public lecture at his alma mater, Birmingham University, and he recently accepted a Fellowship of the Royal Society of Chemistry.

It's known that he has two children and lives near Ineos's headquarters in Hampshire in the south of England, that he enjoys ski-ing, running, mountains and wine, and that's about it.

He is described as down-to-earth and fascinated by business, but does that really account for his seemingly insatiable dealmaking? Is the achievement of a merger or an acquisition an end in itself for him?

The truth about this fascinating man is likely to be much more straightforward. Though no one has ever revealed what truly drives him, it could well be that Ratcliffe is inspired by a dream, a vision - to build the biggest and best chemical company in the world, a new and bigger ICI, and to do so from Britain.

To achieve that will require deals that even Jim Ratcliffe will find a challenge. Suffice to say we have not heard the last of him.

KEY DEALS THAT TRIGGERED RATCLIFFE'S RAPID RISE

1998 RATCLIFFE forms Ineos with the acquisition of a former BP plant in Antwerp from Inspec for GBP 90 million. Production at the site triples inside three years.

2001 Ineos acquires ICI's Crosfield, Chlor-Chemicals and Klea Refrigerants concerns and forms Ineos Silicas, Chlor and Fluor divisions. The reported price is GBP 325m. Ineos makes a transatlantic move, buying up Dow Chemical's global ethanolamine business and other American and Canadian plants.

Ineos acquires a majority shareholding in European Vinyls Corporation (EVC) and buys Phenolchemie for GBP 264m.

2003 Ineos acquires Methanova from Degussa for an undisclosed sum and forms INEOS Paraform.

2005 Ineos completes takeover of EVC, which is renamed Ineos Films.

Ineos buys BASF's US and Canadian polystyrene business for an undisclosed sum. Ineos acquires Surface Specialties amino resins business from Cytec Industries for dollars 78m and forms Ineos Melamines.

Ineos Phenol purchases cumene plant in Port Arthur, Texas, from Chevron Phillips.

2006 Ineos completes GBP 5bn takeover of Innovene from BP and forms Ineos Nitriles, Olefins, Olefins and Polymers USA, Oligomers, Polyolefins, Refining and Technologies divisions.

After a GBP 1.6bn bond issue, Ineos buys BP's ethylene oxide business in Germany. Ineos Enterprises buys UK-based evaporated salt firm from Salt Union of America for dollars 36.3m.

2007 Ineos Fluor agrees joint venture with Zhejiang Xing Teng Chemical Company of China to produce Anhydrous Hydrogen Fluoride (AHF) at a new plant at Shangrao, Jiangxi Province.

Ineos buys Norway's Borealis AS and 50 per cent of Noretyl Cracker for reported GBP 200m.

Ineos buys Hydro Polymer and the remaining 50 per cent share of the Noretyl Cracker from Norsk Hydro to become Europe's largest producer of PVC.

(c) 2008 Scotsman, The. Provided by ProQuest Information and Learning. All rights Reserved.

Source: Scotsman, The

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