BP to float £4.2bn arm in New York

BP has hired Goldman Sachs and Morgan Stanley to advise it on a flotation of parts of its petrochemicals business with a book value of $8bn (£4.2bn) in New York this year.

The oil giant indicated yesterday it might appoint other investment banks to help advise on the initial public offering. Last April BP unveiled plans to spin off half of its petrochemicals portfolio,saying it would return the money raised via a share buy-back. This business, known as olefins and derivatives (O&D), has had poor returns for years.

According to reports, the company wants to raise about $3bn from the sale of a 50 per cent-plus stake in its O&D business. The unit, which makes $13bn of annual sales, makes plastics materials that are sold to the manufacturers of goods such as polythene and plastic pipes. The rest of the petrochemicals portfolio, the so-called "advantaged products" business, makes more sophisticated chemicals and materials that are used in goods such as polyester and plastic bottles.

Before the initial public offering, the O&D unit will be separated into a stand-alone entity next month, and headed by Ralph Alexander, the chief executive of BP's petrochemicals business.

The flotation is planned for the fourth quarter of this year on the New York Stock Exchange. Byron Grote, BP's chief financial officer, has said New York would provide a "more natural home" for the listing, rather than London, where BP is based. He said US investors were more receptive to chemicals businesses.

BP has also considered a sale of the O&D business, but a float is regarded as the most likely outcome.

Last month BP reported record profits of $16.2bn for last year and lifted its dividend by 26 per cent, raising its total payout to shareholders for 2004 to $13.7bn, including stock buy-backs.

With profits soaring, the company's annual report, published this week, is likely to reveal a bumper pay award last year for its chief executive, Lord Browne. He made a total of £4.78m in 2003, of which the bulk was bonuses and share options.