Dow to optimise its ownership in Kuwaiti jvs; still in discussion on Dow Corning jv

US chemical giant Dow Chemical says it intends to restructure its participation in its group of Kuwaiti joint ventures with the objective of optimising its investment and expanding its relationship with Greater Equate on the US Gulf Coast. This announcement aligns with Dow’s prior stated commitments to optimise its investments in certain joint ventures.

The optimisation is expected to occur in two phases over the next nine months, with Dow to reduce its overall equity in the MEGlobal joint venture, with Petrochemical Industries Company (PIC), as well as its overall ownership interest in Greater Equate.

Under the first phase, Equate would acquire MEGlobal for a total equity consideration of US$3.2 billion. The transaction will result in Dow receiving US$1.5 billion in pre-tax proceeds. Following completion of this acquisition, which is expected to close by year-end 2015, Dow will retain a 42.5% ownership stake in MEGlobal through its ownership of Greater Equate. This acquisition is also expected to drive efficiencies and cost savings due to existing synergies between MEGlobal and Equate.

In the second phase, Dow and PIC have agreed that Dow will further reduce its overall ownership interest in Greater Equate. The target to complete this second phase of the transaction is mid-2016.

In a related move, MEGlobal will build an MEG plant on the US Gulf Coast – enabling MEGlobal and its parent companies to enjoy growth in a highly strategic region of the world and drive significant expansion of MEGlobal’s geographic footprint and capacity. Final location of the asset is contingent upon pending incentives. The plant will start up this quarter, and will ramp to full production over the next two years.

“This announcement demonstrates Dow’s commitment to evaluate our joint venture portfolio to unlock value for shareholders and simultaneously expand our relationship with a key strategic partner,” said Andrew N. Liveris, Dow’s Chairman/CEO. “This transaction allows Dow to maximise shareholder value, while maintaining our commitment to these industry-leading joint ventures.”

MEGlobal is a world leader in the manufacture and marketing of monoethylene glycol and diethylene glycol (EG), and is headquartered in Dubai, UAE. Established in July 2004, MEGlobal currently markets over 2.5 million tonnes/year of EG globally. EG is used as a raw material in the manufacture of polyester fibres (clothing and other textiles), polyethylene terephthalate (PET) resins, antifreeze formulations and other industrial products.

Established in 1995, EQUATE is the operator of an integrated world-scale manufacturing facility producing more than 5 million tons annually of high-quality petrochemical products, including polyethylene, ethylene, and EG, that are marketed throughout the Middle East, Asia, Africa and Europe. Formed in 2004, The Kuwait Olefins Company (TKOC) is an international joint venture among Dow, Petrochemical Industries Company (PIC), Boubyan Petrochemical Company (BPC) and Qurain Petrochemical Industries Company (QPIC). Equate is the single operator of Greater Equate, which includes TKOC, The Kuwait Styrene Company (TKSC), and Kuwait Paraxylene Production Company (KPPC) under one fully integrated operational umbrella at Kuwait’s Shuaiba Industrial Area.

Meanwhile, regarding reports about Dow and Corning relating to the future of the 72-year old joint venture Dow Corning, a Bloomberg report says that Liveris sees a future for Dow Corning within Dow but Corning now has new priorities after acquiring Samsung Electronics’s state in a separate venture. He said, “We are both very anxious to find the best owner mindset here, without hurting Dow Corning.” But when asked about the “best owner”, Liveris did not give a firm reply.

Liveris also noted that Dow Corning, which focuses on silicone and silicon-based products, has been going through “tough” times due to the changed global polysilicon market and ongoing trade dispute with China, resulting in what he said was a “recalibration” of Dow Corning’s Hemlock Semiconductor joint venture. But Liveris also said that the company had returned to profitability recently.

Last year, Dow Corning said it had increased sales for four consecutive quarters, with sales up by 7% and profits by 49% in the third quarter of 2014.

Both firms have been quoted as saying that they are in discussions about the future ownership structure of the joint venture company.