US Dow to carve out $5bn of its commodity chemicals businesses

02 December 2013 14:06 Source:ICIS News

Dow Headquarters, Midland, MichiganLONDON (ICIS)--Dow Chemical will carve out a significant portion of its chlorine value chain for future transactions, representing up to $5bn (€3.7bn) of its total annual revenue, the US chemicals major said on Monday.

The scope includes approximately 40 manufacturing facilities at 11 sites, and almost 2,000 employees, the company added.

Dow said it will explore all separation alternatives for these businesses, including potential ownership structures and partnerships such as joint ventures, spin-offs and divestitures.

It expects to execute transaction activities related to these businesses within the next 12 - 24 months.

“Today’s announcement represents a continuation of the shift of our company toward downstream high-margin products and technologies that customers value, and generate consistently higher returns than cyclical commodity products,” said Andrew Liveris, Dow’s chairman and CEO.

“These businesses have served us well over decades, but are serving markets that Dow has exited over time, and we are therefore right-sizing our upstream integration to match the downstream focus that we started a decade ago,” Liveris added.

“Separating these business units will allow us to further optimise the way they can be operated; and we believe different owners will be able to extract maximum value from these highly competitive assets and their related markets.”

Assets part of Dow’s carve out include its US Gulf Coast chlor-alkali and chlor-vinyl facilities in Plaquemine, Louisiana, and Freeport, Texas, including the group’s interest in the Dow Mitsui chlor-alkali joint venture in Freeport.

It also includes Dow’s global chlorinated organics production facilities in Freeport and Plaquemine as well as in Stade, Germany, it added.

Dow will also be looking to carve out assets in its global epoxy business, including units at Freeport and Roberta in the US; Rheinmuenster, Baltringen and Stade in Germany; Pisticci, Italy; Gumi, South Korea; Zhangjiagang, China and at Guaruja in Brazil.

Options to sell the group’s brine and select assets which support operations in Freeport and Plaquemine and energy operations in Plaquemine, will also be explored.

“In addition to these separation actions, the company also announced that it will shut down approximately 800,000 tonnes of chlorine and caustic equivalent capacity in Freeport, Texas,” Dow said in a statement.

“The capacity being shut down will be replaced with supply from new facilities that will come online with the start-up of the Dow Mitsui joint venture in early 2014. The shutdowns will help maintain Dow’s balances and will be coordinated with the start-up of the joint venture,” it added.

Dow said the carve out announcement outlines a clearly defined scope of businesses that are located in “attractive regions and are backed by a low-cost energy position attractive for producers of chlorine-based chemicals such as caustic soda and PVC [polyvinyl chloride]”.

Dow’s executive vice president Jim Fitterling will oversee the separation and transaction activities.

“Due to the highly integrated nature of the chlorine value chain, we are conscious not to leave any stranded costs or create negative synergies,” said Fitterling.

“Further, we anticipate that any related transaction or transactions will include supply and purchase agreements between these units and the company to support downstream products aligned with Dow’s strategic market focus.”

($1 = €0.74)

By Franco Capaldo