Dow and PIC of Kuwait Sign Binding Joint Venture Agreement to Launch K-Dow Petrochemicals
December 3, 2008
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.