MIDLAND, MI/KUWAIT CITY, Kuwait - The Dow Chemical Co. (Dow) and Petrochemical Industries Co. (PIC), a wholly owned subsidiary of Kuwait Petroleum Corp. (KPC), 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 a global supplier of petrochemicals and plastics. It is expected that the new company will begin operations no later than Jan. 1, 2009.
K-Dow will be a global supplier of 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 N. 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.
Dow and PIC also announced that two of their existing 50\50 joint ventures will be moved into K-Dow: MEGlobal, a 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.
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PCI’s December issue is our annual Buyers’ Guide, featuring information on companies that supply or distribute raw materials and equipment used to formulate and manufacture paints and coatings. The issue also features articles on chemical assessment, supply chain best practices and the U.S. Trade Remedies law.