Reliance is building the world's first cracker that will be entirely fed by off-gas from its huge refinery expansion at Jamnagar. This technology has been used before, but never on this scale because nobody has had enough refinery capacity to run a cracker 100% on very cheap off-gas.
The Dow strategy includes looking for cheaper sources of ethylene and for "asset light" investments, ie, where it doesn't have to spend a bundle of cash to get its hands on cheap raw material. This has proved a highly effective strategy in Kuwait through the Equate joint venture.
In addition, Dow would get access to the Indian market where the growth potential is huge.
As for Reliance, it wants technologies - Dow's great strength - and also access to the US chemicals market. The US, despite low growth, is still the world's biggest market.
And so, I think, a Dow-Reliance tie-up makes a lot of sense.
As for a leveraged buyout of Dow, the complexities of which are made so simple even I can understand them in this excellent article from my colleague Joe Chang, what about the politics?
Middle East companies would very probably have to be part of such an historically massive to deal; they have the cash and don't have pressure from nervous shareholders. I am not sure whether Sinopec or PetroChina would be interested as their focus is on securing overseas oil and gas assets.
After the Dubai Ports controversy last year, an LBO involving the Middle East would surely be blocked by Congress.