Dow Chemical DOW has finalized the transaction to divest its ownership interest in the MEGlobal joint venture to EQUATE Petrochemical Company K.S.C. and has received $1.5 billion in pre-tax proceeds. EQUATE is the operator of an integrated world-scale manufacturing plant which produces high-quality petrochemical products that are marketed throughout the Middle East, Asia, Africa and Europe.
Dubai-based MEGlobal is a leading producer of monoethylene glycol and diethylene glycol (EG) and is a joint venture between Dow and Petrochemical Industries Company (PIC) of Kuwait. MEGlobal currently markets more than 2.5 million metric tons of EG annually. EG is used as a raw material to make polyester fibers, polyethylene terephthalate resins, antifreeze formulations and other industrial products.
Dow, in Oct 2015, declared that its joint ventures in Kuwait will be restructured over the next several months, leading to a different ownership structure. In the second phase, the company will further reduce its overall ownership interest in the Greater EQUATE joint venture. This transaction is expected to complete by mid-2016.
The completion of the MEGlobal transaction represents a key step in Dow’s plans to optimize its ownership in its Kuwaiti joint ventures while returning value to its shareholders. HSBC Securities (USA) Inc. acted as financial advisor to Dow for the transaction. Dow now retains a 42.5% ownership stake in MEGlobal through its ownership interest in EQUATE.
Dow’s shares rose 2% to close at $52.53 last Wednesday.
Dow remains focused on executing its growth actions as well as portfolio management and productivity initiatives. The company remains committed to selectively spinning off or selling its underperforming assets and gradually shifting to high-growth markets.
As part of these actions, Dow, in October, wrapped up the separation of a major portion of its chlorine value chain and merger of those businesses with chemical maker Olin Corp. OLN. The tax-efficient consideration value of the transaction is $4.6 billion.
With the chlorine transaction, Dow has surpassed its earlier stated target to dispose $7 billion to $8.5 billion of non-strategic assets by mid-2016, with aggregate pre-tax proceeds from divestments now approaching more than $12 billion.
Dow is a Zacks Rank #3 (Hold).
Better-ranked companies in the chemical space include Celanese Corporation CE and Innospec Inc. IOSP, both holding a Zacks Rank #2 (Buy).
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