Historic JV for Kuwait's PIC inked

Outcome paves the way for Rohm and Haas acquisition says Dow Chemical CEO Liveris

Andrew Liveris, CEO of Dow said the JV was targeting initial sales of $11 billion
Andrew Liveris, CEO of Dow said the JV was targeting initial sales of $11 billion

Outcome paves the way for Rohm and Haas acquisition says Dow Chemical CEO Liveris

Dow Chemical Company (Dow) and Petrochemical Industries Company (PIC), a wholly owned subsidiary of Kuwait Petroleum Corporation (KPC), today announced that they have signed the Joint Venture Formation Agreement and other key definitive agreements regarding the formation of K-Dow Petrochemicals, a 50:50 joint venture that will be the leading global supplier of petrochemicals and plastics.

It is expected that the new company will begin operations no later than January 1, 2009, with closing on that date as articulated in the December 13, 2007 MOU announcement.

K-Dow will be supply essential petrochemicals and plastics and will manufacture and market polyethylene, ethyleneamines, ethanolamines, polypropylene and polycarbonate, and will also license polypropylene technology and market related catalysts. 

“The signing of these documents is the critical step in the formation of K-Dow, which will immediately become a leading petrochemicals supplier globally,” said Andrew Liveris, Dow chairman and chief executive officer. 

“The formation of K-Dow Petrochemicals will be a critical milestone in Dow’s transformation into an earnings growth company. This is a giant step in our strategy of growing our Basics businesses through joint ventures, reducing our capital intensity, and freeing up $9 billion in pre-tax cash proceeds to invest in our Performance businesses. We have effectively set the stage for our next major landmark – completing the proposed acquisition of Rohm and Haas in early 2009.”

“I am very pleased with the outcome of our due diligence and thorough preparation to launch K-Dow Petrochemicals.  The K-Dow joint venture will not only diversify Kuwait’s national economy, but it will also position Kuwait as a leader on the global business stage,” said Maha Mulla Hussain, chairman and managing director of PIC.   “Through the K-Dow joint venture, PIC, in pursuit of its long term strategy, will enter a new arena of petrochemical products based on leading global technologies. 

This represents the best option for PIC to achieve a leading position in petrochemicals and to optimize growth between our connecting businesses of oil refining and basic petrochemicals while building on our long-standing, positive relationship with Dow.”

The total enterprise value of the Dow businesses going into K-Dow is approximately $17.4 billion.  This equates to $8.72 billion for each shareholder.  The final proceeds of the transaction include usual adjustments of $1.2 billion, related to working capital and net debt.

Upon closing of the transaction, each shareholder plans to receive a $1.5 billion special cash distribution, paid by K-Dow.

The gross payment by PIC is expected to be approximately $7.5 billion, with the net payment of $6 billion, including the special cash distribution from K-Dow.

Dow expects to receive $9 billion in total pre-tax proceeds related to the transaction.  These proceeds include the special cash distribution from K-Dow of $1.5 billion.

Dow and PIC also announced today that two of their existing 50:50 joint ventures will be moved into K-Dow: MEGlobal, a world leader in ethylene glycol, and Equipolymers, a supplier of PET resins.  K-Dow will have estimated sales of $11 billion and with the addition of MEGlobal and Equipolymers the total annual revenue of K-Dow will be $15 billion.

Polyethylene is the most widely used of all plastics and can be found in everyday products from food packaging, milk jugs and plastic containers to pipes and liners.  Polypropylene is a versatile plastic used in fibers, packaging films, non-wovens, durable goods, automotive parts, and consumer applications.

Polycarbonate is an engineering thermoplastic used in applications such as optical media, electrical and lighting. Amines are a family of chemicals with a broad range of properties, used in various applications from wood treating and pharmaceutical processing, to coatings and consumer products.
 

Newsletter

Most Popular

Digital Edition

Oil & Gas Middle East - September 2020

Subscribe Now