UpdateDow, PIC to set up $11bn petchems jv

13 December 2007 17:35  [Source: ICIS news]

Dow strikes landmark deal(Adds quotes for Dow, background and updates throughout)


By Lucy Craymer


LONDON (ICIS news)--An $11bn joint venture created by US’ Dow Chemical and Petrochemical Industries Co will take advantage of the Kuwait company’s access to feedstocks, Dow chairman and CEO Andrew Liveris said on Thursday.


To form the company, Dow will sell PIC a 50% share in five of its global businesses worth approximately $19bn and PIC will pay the US company $9.5bn.


“The joint venture, to be headquartered in the US, will manufacture and market polyethylene (PE), ethylenamines, ethanolamines, polypropylene (PP) and polycarbonate (PC),” the companies said in a joint statement.


In a press conference, Liveris said it had taken 18 months to agree the non-binding memorandum of understanding (MoU). He expected the joint venture to be completed in late 2008.


The new joint venture will operate as a seperate company. Its name had not been decided but it was important to the companies that its name retained some connection to both, Liveris said.


“The JV is expected to have revenues of more than $11bn (pro forma) and employ more than 5,000 people worldwide,” Dow said.


The JV will mean Dow has access to feedstocks from the future refinery projects of PIC parent Kuwait Petroleum Corp.


Dow's $2.9bn Olefins II project with PIC is expected to start up in August next year, a PIC offical said on Thursday.


Access to low-cost feedstocks in the Middle East is necessary for Dow to remain competitive and have a global advantage, Liveris said.


“This will give the new joint venture company the distinct advantage of full integration from feedstocks to derivatives, while meeting growing customer demand in emerging markets,” Dow said.


“This project is the child of a company keen to grow,” Liveris said. “We will find projects to invest in.”


The deal will position Kuwait as a "global player" within petrochemicals, while building on Dow's management strengths around the world, said Robert Bauman, vice-president for polymers at the Nexant consultancy in Houston, Texas.


"It conforms to Dow's strategy and will make them more competitive by allowing them to capitalise on areas where they are competitive," Bauman said. "All assets that are not performing will be shut down."


The two companies have been working together for 10 years, said Liveris. PIC already has two joint ventures with Dow - Equate Petrochemical and MEGlobal.


“They know us - they trust us - we have delivered,” he said in a television interview after the news conference.


The JV is a way for Kuwait to achieve more “global credibility”, he added.


Dow’s shares were up 7.47% to $44.87 in early morning trading on the New York Stock Exchange.


With additional reporting by Brian Ford and John Waggoner in Houston

By: Lucy Craymer
+44 20 8652 3214

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