RIL's plans to form a JV with Dow Chemicals suffers a setback

09-Mar-07

Dow's margins on commodity chemicals is growing slimmer, especially with the soaring cost of natural gas (feedstock) in the US. Dow has been planning to move its commodity business assets to a separate JV with a strategic partner with access to raw materials. Currently, Dow's commodity plastics business make up about 24% of Dow's US$49 bln turnover, while commodity chemicals comprise about 11%. Reliance Industries had commenced discussions to form a joint venture with Dow in a bid to expand globally. If this JV were to materialise, Dow would get access to the low feedstock base in India and improve its margins on the commodity chemical operations. However, this joint venture with Dow Chemicals seems to have suffered a setback with the US chemical major reportedly becoming the target of a leveraged buyout. After the sudden entry of PE funds, Reliance may prefer to stay away from a bidding war. Early last year, RIL had made an US$8 billion unsuccessful bid for BP's Innovene, followed by another US$10 billion unsuccessful bid for Saudi Aramco's Ras Turana refinery-cum-petrochemical project.