Canadian Plastics

Dow to form joint venture for plastics with Indian company: report

An Indian newspaper has reported that US-based Dow Chemical Company is close to signing a joint venture agreement w...

March 19, 2007   Canadian Plastics

An Indian newspaper has reported that US-based Dow Chemical Company is close to signing a joint venture agreement with an Indian petrochemical firm.

The Times of India said that Dow would spin off its basic plastics and chemicals into a new company, and Reliance Industries Ltd. (RIL) will invest nearly US$12 billion to gain a 59 per cent majority stake in the US$20 billion joint venture. According to the paper, Dow would retain a 41 per cent stake in the venture, valued at US$8 billion. No sources were cited for the information in the news report.

The news of a potential agreement was quickly picked up by financial analysts, who speculated about the viability of a joint venture for Dow’s plastics and chemicals business.

“We view potential for such a combination as consistent with Dow’s ‘asset-light’ commodity strategy and more credible than prior market speculation of a private equity takeout,” said Bank of America’s Kevin McCarthy in a Mar. 15 note to investors.

McCarthy noted that Dow would either form a partnership for polypropylene (PP) and polystyrene (PS), or create a joint venture partnership for all of Dow’s plastics and chemicals business.

Dow chairman and CEO Andrew Liveris first expressed an interest in creating a new model for the company’s polystyrene and polypropylene businesses in January during a fourth quarter conference call with investors.

“Our goal is to better compete in these dynamic businesses, and in each of these cases, we will work with partners who offer added strengths such as further back integration in feedstocks or expanded geographic presence,” noted Liveris. “So once again, stay tuned for some bold new moves in our Basics portfolio.”

RIL, which is headquartered in Mumbai, India, seems like a prime candidate to expand on Dow’s retooling efforts. According to the company’s website, RIL is Asia’s largest manufacturers of PP, and among the top eight PP producers in the world.

Representatives from both companies refused to comment on the possibility of a joint venture deal.


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