Dow Chemical of the US and its Kuwaiti partner are selling a petrochemical joint venture for US$3.2 billion as part of Dow’s divestment plan aimed at funnelling capital into other activities.
Kuwait’s Equate will buy ME Global, an ethylene glycol maker, from Dow and Petrochemical Industries Company, a unit of state-run Kuwait Petroleum Corp, Dow and Boubyan Petrochemical said in separate statements. Kuwait-listed Boubyan owns 9 per cent of Equate.
The deal is expected to close by the end of this year.
Dow will receive $1.5bn in pre-tax proceeds from the sale, which is part of non-binding agreements to sell further stakes in its Kuwaiti joint ventures.
Dow and PIC are partners in several petrochemical joint ventures under the name of Great Equate.
“Firstly, the Kuwait joint ventures will be restructured over the next nine months, resulting in a different ownership structure and enabling strategic growth for these companies,” Dow said in a statement.
“In the second phase, Dow will further reduce its overall ownership interest in Greater Equate. The pre-agreed with PIC target date to complete this second phase of the transaction is mid-2016.”
Dow announced last November that it plans to reduce its stakes in all of its Kuwait joint ventures as part of a $8.5bn divestiture plan.
PIC plans this year to offer to the public stakes in petrochemical joint ventures with Dow, Mohammad Al Farhoud, the PIC chairman, said last December.
Separately, ME Global will build a plant on the US Gulf Coast to help expand the company’s footprint. ME Global currently markets 2.5 million tonnes of ethylene glycol per year globally. Ethylene glycol is used as raw material in the production of clothes, anti-freeze and other industrial products.
Meanwhile, Dow’s third-quarter profit soared 51.4 per cent to $1.29bn as it benefited from lower raw material costs and better margins. Sales, however, dropped 16.7 per cent to $12bn.
“In the forthcoming quarters we will continue to see growth and capture that growth in markets such as China, the US and Europe, despite challenging macros in other parts of the world, such as Brazil,” said Andrew Liveris, Dow’s chairman and chief executive.
Dow is gearing up to starting production this year from Sadara Chemical Company, its $20bn petrochemical joint venture with state-run Saudi Aramco.
The project in Saudi Arabia will produce 3 million tonnes of petrochemicals a year once fully operational next year. The project is the world’s largest such facility to be built in a single phase.
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