US Dow may pursue JVs for HDPE, PP - analyst

10 January 2011 21:51  [Source: ICIS news]

HOUSTON (ICIS)--US producer Dow Chemical could pursue joint ventures (JV) of its high-density polyethylene (HDPE) and polypropylene (PP) businesses, as these have no technology advantages and produce commodity-like returns, an analyst said on Monday.

Dow could realise $2bn-3bn (€1.6bn-2.3bn) for a 50% share in HDPE and PP, said David Begleiter, research analyst for Deutsche Bank.

Begletier made his comments in a research note.

Dow might also consider selling its 42.5% interest in Equate, its joint venture with Petrochemical Industries Co (PIC), Boubyan Petrochemical and Qurain Petrochemical Industries, Begleiter said.

While Equate is highly profitable, it is not a core business for Dow, and it does not provide feedstock integration for the company's performance business, Begleiter said.

He estimated that Dow's interest in Equate is worth $2.5bn.

In one possible scenario, Dow could make a deal that would establish the HDPE and PP joint venture; sell the Equate stake; and resolve the failed K-Dow Petrochemicals joint venture.

Dow is seeking $2.5bn in the K-Dow dispute, which is in arbitration, he said.

If Dow reached such an agreement, it could receive $6bn-9bn, Begleiter said. Dow could then use the proceeds to repurchase $4bn of preferred shares and pay down debt.

Dow has said that it would consider partnerships for a portion of its basic plastics business - although nothing approaching the scale of its failed K-Dow joint venture.

Dow would likely retain businesses in which it retains a technology advantage over the competition - such as linear low-density polyethylene (LLDPE) and low-density polyethylene (LDPE), Begleiter said.

Dow did not immediately respond to a request for comment.

($1 = €0.78)

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By: Al Greenwood
+1 713 525 2645



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