Dow forms styrenics joint venture with Chevron Phillips Chemical

Midland, Mich.-based chemical and plastics maker Dow Chemical Company has signed a non-binding memorandum to form a joint venture for its styrenics business with The Woodlands, Tex.-based Chevron Phillips Chemical Company LP.

Both companies announced today that the joint venture would involve assets from their polystyrene and styrene monomer businesses in the Americas. The new venture is still subject to customary regulatory review, due diligence, completion of definitive agreements, and corporate and other approvals. The companies expect the transaction to close in the second half of 2007.

“Today’s announcement marks another key milestone in Dow’s strategic agenda and underscores our commitment to change the company’s long-term earnings profile,” said Dow’s chairman and CEO Andrew Liveris in a press release. “This joint venture is what our Asset Light strategy is all about: joining forces with a complementary partner who brings value to Dow through its excellent feedstock position and with whom we can build a stronger regional presence, reduce costs, innovation and deliver a superior service to our customers.”

Liveris had expressed an interest in creating a new model for the company’s polystyrene and polypropylene businesses earlier this year. He told investors at a quarterly conference that the company would work with partners in order to be more competitive with its Basics portfolio.

The announcement of a joint venture with Chevron Phillips Chemical comes at the heels of a month of speculation about the company’s new financial direction. Dow was rumoured to be in talks about a joint venture with Indian petrochemical firm Reliance Industries Ltd. last month. Earlier this week, a UK tabloid claimed that the company would receive a US$50 billion buyout bid from a contingent of Middle Eastern investors and US buyout firms.

Although this new joint venture is still subject to due diligence, no Canadian locations are expected to be included in the venture. Dow intends to contribute a styrene monomer plant in Camacari, Brazil, and six polystyrene plants in Gales Ferry, Conn.; Ironton, Ohio; Joliet, Ill.; Torrance, Calif.; Cartagena, Colombia; and Guaruja, Brazil. Chevron Phillips Chemical would contribute a St. James, Louis.-based styrene monomer plant and a Marietta, Ohio-based polystyrene plant.