InterviewDow sees no ‘big-bang’ deal for plastics - Liveris

01 November 2010 23:10  [Source: ICIS news]

By Joseph Chang 

MIDLAND, Michigan (ICIS)--US-based Dow Chemical will aim for a joint venture or to divest select commodity portions of its plastics business rather than doing a “big-bang” deal similar to the failed K-Dow transaction, its chief executive said on Monday.

 “We will keep working to lessen the commodity part of our plastics portfolio,” said chairman, president and CEO Andrew Liveris on the sidelines of Dow’s Investor Day in Midland.

“We will look to joint venture or divest the commodity pieces. Expect some transactions in the next 12-24 months but there will be no big-bang deals - just selective deals,” he added.

K-Dow was the name of its planned polymers joint venture with Kuwait’s Petrochemical Industries Co. (PIC), which collapsed in December 2008.

While Liveris would not name which businesses were being targeted for a joint venture or divestiture, he noted that “all polyolefins are not created equal. For example, the portfolio has lower value-add polyolefins, such as polypropylene [PP] and high density polyethylene [HDPE].”

He pointed out that Dow had been a “very focused polyolefins company based on metallocene technology” prior to its acquisition of Union Carbide in 2001. The HDPE and PP businesses came with the Carbide deal.

Dow will focus on higher value-added polymers such as linear low density PE (LLDPE) serving market segments such as flexible food and specialty packaging, and health and hygiene, said Liveris.

The move to seek select divestitures of commodity polymers rather than pursue a large deal for much of the business is a change from Dow’s prior stated strategy.

Dow had a chance to sell off much of its polymers business earlier this year but passed.

“Our thinking has changed. We resisted exiting at a low [valuation] multiple earlier in the year,” said Liveris.

Dow’s outlook for the overall polymers business has turned more bullish, with underlying demand growth continuing and operating rates remaining high, he noted.

“We remain bullish on plastics. We believe industry pundit forecasts for 2011 are too bearish - both in terms of demand growth as well as effective operating rates,” said Liveris.

“On demand, we still expect ethylene derivatives to grow at about 1.4 times GDP. And we question why effective operational performance would be materially different from that of 2010,” he added.

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By: Joseph Chang
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