Dow continues divesting to become a more asset light business

05-Aug-09
Dow Chemical continues its series of divestitures as part of its endeavor to become a more asset light business. This will result in limiting its dependence on raw materials and aid in paying the debt from its acquisition of Rohm & Haas. The latest round of restructuring has been approved by the company's board to result in US$100 million cost savings annually and is part of Dow’s plan of cutting annual costs by US$1.3 billion to cope with its US$16.3 billion acquisition of Rohm & Haas in April. The latest shutdowns have reduced ethylene demand in the Gulf Coast by 30% and are in addition to shutdowns announced last year of four production units in Lousiana and Texas. Dow also estimates to end purchases of about 3 bln lbs a year of ethylene from the merchant market. Dow has been seeking to shift its portfolio to higher-margin specialty chemicals and pay down billions in debt it took on when it purchased Rohm and Haas earlier this year. Dow is looking for buyers for Styron - a newly formed unit that includes its styrenics and polycarbonate holdings. The unit will include Dow’s polystyrene, ABS, SAN, PC, styrene monomer, styrene-butadiene rubber and latex assets, with as annual sales of about US$5 bln. The unit also will include Dow’s 50% stake in Americas Styrenics, the PS/styrene joint venture that was formed with Chevron Phillips in 2007. Dow is looking to sell the unit for US$1-2 bln. In a bid to increase Dow's financial flexibility, improve its cash flow, and pay down its bridge loan, Dow haas planned to divest in OPTIMAL. Dow’s Union Carbide Corporation subsidiary is to sell its entire shares of ownership in the OPTIMAL Group of Companies (OPTIMAL) to PETRONAS for US$660 mln. The transaction is subject to customary conditions and approvals, is expected to conclude by end of Q3-2009. Dow will market OPTIMAL's basic and performance chemicals products to Dow's existing customer base in Asia Pacific. PETRONAS would fund this acquisition through internally generated funds. The acquisition will enable PETRONAS to strengthen its presence in Olefins and reinforce the growth of the Malaysian petrochemical industry. Dow has agreed to sell an acrylic acid and esters plant along with the North American unit of its UCAR Emulsion Systems specialty latex business to Arkema for US$50 mln. Dow has announced the $1.7 bln sale of Morton Salt, a transaction expected to close in H2-2009, sold its calcium chloride business to Occidental Petroleum for more than US$210 mln and signed a deal to sell its stake in Total Raffinaderij Nederland (TRN) for an expected US$725 mln. After conducting a comprehensive review of potential options, Dow plans to shutter its ethylene oxide and glycol (EOEG) production facility at Wilton by the end of January 2010. The options included seeking a buyer for the site and engagement with industry leaders, regional and government groups to identify alternatives to a shutdown. Dow Chemical Co. plans to shutter three plants in Louisiana that produce ethylene and related products, along with slashing outside ethylene purchases. These steps to reduce ethylene supply have been taken as internal demand has diminished due to last year's restructuring plan. Specific sites in the company's basics portfolio that will be impacted include: *An ethylene cracker in Hahnville, Louisiana *An ethylene oxide/ethylene glycol production unit in Hahnville, Louisiana *An ethylene dichloride and vinyl chloride monomer facility in Plaquemine, Louisiana The company has already achieved US$118 million in purchasing savings from leveraging supplier contracts between Rohm & Haas and Dow.
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