Sector News

Dow Chemical to Sell Stakes in Kuwait Joint Ventures

November 13, 2014
Chemical Value Chain
Dow Chemical Co. said it would sell stakes in two petrochemical joint ventures in Kuwait as part of its efforts to streamline its business and raise cash so the company can buy back more of its own shares.
 
The Midland, Mich.-based chemical giant is under pressure to pare back its businesses to focus on high-margin products instead of commodities.
 
One of the Kuwaiti joint ventures produces raw materials used to make polyester fibers and antifreeze, among other products. The other venture makes petrochemicals used to make plastics for markets in the Middle East, Asia, Africa and Europe.
 
Chairman Andrew Liveris said Dow’s goals no longer fully match up with its Kuwaiti partners in MEGlobal and Equate, which include Petrochemical Industries Company of Kuwait and other companies.
 
Mr. Liveris said the company reached an agreement Wednesday morning to sell another unit, Buffalo Grove, Ill.-based additives maker Angus Chemical Co., to Golden Gate Capital, a private-equity firm in San Francisco, for more than $1.2 billion.
 
Dow said earlier in the fall that it was on track to raise between $4.5 billion and $6 billion by the end of 2015 by shedding divisions it no longer views as central to its core strategy. So far, the company has brought in $2.5 billion, including the Angus deal but excluding both planned Kuwaiti divestments. The company now aims to raise at least $7 billion—and as much as $8.5 billion—from asset sales by mid-2016.
 
“There is no asset that is sacred, no market position that is sacred,” Mr. Liveris told reporters Wednesday. “We believe we’ve got more we can do.”
 
Dow is in the midst of selling and spinning off several commodity chemical businesses with low profit margins, such as plants that make chlorine and epoxy, but activist investors are pressuring the company to go further.
 
Daniel Loeb of hedge fund Third Point LLC has called for Dow to split off its petrochemicals business from its higher-margin specialty-chemicals business. Mr. Liveris said he speaks with Mr. Loeb on a regular basis, but continued to defend the company’s integrated business model. Dow uses its lower-margin chemicals, such as ethylene and propylene, to upgrade into higher value products for agriculture, electronics and other industries.
 
The company also said Wednesday that its dividend would return to its highest level since 2008. Dow will increase its dividend to 42 cents a share in the fourth quarter, up from 37 cents in the third quarter. The company also said it would boost its share-buyback program by $5 billion over the next three years. Dow’s current $4.5 billion share repurchase program will be completed by the end of this year.
 
By Alison Sider 
 

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