Chlorine-deal proceeds raise Dow divestment target to $3bn-4bn

24 October 2013 17:44  [Source: ICIS news]

HOUSTON (ICIS)--US-based Dow Chemical raised its target for divestments to $3bn-4bn (€2bn-3bn) over the next 18-24 months, an increase that reflects additional proceeds it could obtain from either joint ventures or divestments in its chlorine portfolio, CEO Andrew Liveris said on Thursday.

The new target is up from $1.5bn announced earlier. That $1.5bn reflected several deals worth $50m-200m and joint ventures, the company said.

"The additional divestiture proceeds will come from the strategic decisions we are making regarding markets and value chains within our chlorine portfolio," Liveris said during a Q3 earnings conference call.

The scope of the deals should become clearer during the next six months, he said.

Liveris announced that the company was considering joint ventures or sales in its chlorine business in July during a Q2 earnings call.

Liveris elaborated on the reasons behind the decision during the company's most recent call.

Chlorine derivatives are behaving more like commodities, and these are not best suited for Dow's strategy of raising return on capital, Liveris said.

"While we are driving aggressive plans to improve these businesses, we believe the different owner is better positioned to expect maximum value long-term from portions of our chlorine and derivatives assets, such as epoxy resins, chlorinated organics and the vinyls chain," he said.

Still, Dow needs chlorine derivatives as feedstock for some of its downstream, higher-margin products, Liveris said.

The company expects that it can pull off a chlorine divestment or joint venture without threatening its integration strategy, Liveris said.

Dow has done this in the past. Liveris pointed to the sale of the company's Styron business to Bain Capital in 2010 for $1.63bn. The deal included several long-term supply, service and purchase agreements between Dow and Styron.

Styron included Dow’s polycarbonate (PC), acrylonitrile butadiene styrene (ABS)/styrene acrylonitrile (SAN) resins, polystyrene (PS) and styrene monomer operations, as well as the company’s stake in the Americas Styrenics joint venture with Chevron Phillips Chemical.

For chlor-alkalis, Dow has already created a joint venture, Dow-Mitsui Chlor-Alkali (DMCA), with Mitsui & Co in 2010.

The joint venture was formed to build an 800,000 tonne/year membrane-based chlor-alkali plant at Dow’s chemicals complex in Freeport, Texas.

($1 = €0.73)

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By: Al Greenwood
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