By: Frank Esposito
March 15, 2013
MIDLAND, MICH. -- Dow Chemical Co. is seeking a buyer for two of its plastics-related businesses: polypropylene licensing, and catalysts and plastics additives.
The March 14 announcement is a follow-up to December remarks by Chairman and CEO Andrew Liveris, who said the company would sell non-core businesses with combined annual sales of $1 billion during 2012.
Now, however, Dow is saying that it plans to sell businesses with combined annual sales of almost $1.5 billion in the next 18 months.
Midland, Mich.-based Dow said the two businesses currently on the block "will be actively marketed for divestment."
The announcement "is yet another proof point of Dow's rigorous focus on return to capital," Liveris said in a news release. "We are reviewing our entire portfolio and seeking even further opportunities to optimize value … [by] selectively pruning assets that are no longer a strategic or financial fit."
Since 2009 Dow has sold businesses with annual sales of around $8 billion. In January, the firm sold the stabilizers component of its plastics additives unit to PMC Group for an undisclosed price.
The plastics additives business had sales of about $585 million in 2011, according to Dow financial reports. The business operates nine plants worldwide, including U.S. plants in Louisville, Ky.; and Philadelphia and Springhouse, Pa. An employee head count for the business was unavailable.
The company did not disclose sales for PP licensing and catalysts. A spokeswoman said the business employs about 100 at seven sites worldwide, including a headquarters in Houston and catalyst production in Texas and elsewhere.
Former Dow executive Roger Young said he was not surprised that Dow would sell the PP licensing unit, since the company no longer has a PP resin unit — Dow sold that business to Braskem SA in 2011.
"If you're not in the PP business why would you want to support PP process R&D to stay on the leading edge?" Young wrote in an email. Young is a consultant with with Akron, Ohio-based Robert Eller & Associates.
Industry sources said Dow's Unipol-brand catalyst technology ranks second worldwide in total licenses, trailing only Spheripol technology owned by LyondellBasell Industries. But, they added, the gap between Spheripol and Unipol is fairly wide.
Young added that a good portion of Dow's plastic additives business was formerly part of specialty chemicals maker Rohm and Haas Co., which Dow bought in 2009. That acquisition "met synergy targets, but not profit contributions," Young said.
Selling the plastics additives unit "makes sense, and if used to deleverage debt, [is] a good investment," Young added.
Young also pointed out that since neither plastics additives nor PP licensing originated with Dow — the licensing business was acquired from Union Carbide — the firm has "no internal loyalties" to either business.
Dow is looking to recover from a difficult 2012, when total company sales fell 5 percent to $56.8 billion and profit plummeted more than 60 percent to $1.1 billion. Sales were affected by a low-growth global economy, while profit was impacted by a $1 billion fourth-quarter restructuring charge.
Sales in Dow's performance plastics unit — including its polyethylene, elastomers and packaging businesses — fell almost 11 percent to $14.5 billion in 2012, as pretax profit slid 12 percent to just over $3 billion. The firm's performance materials business — including polyurethane and epoxies — saw 2012 sales drop by 7 percent to $13.6 billion, while the unit's pretax profit plummeted more than 40 percent to just over $1 billion.
In spite of the declines, those two units remained Dow's two largest, based on annual sales, accounting for almost half of the company's 2012 sales total of $56.8 billion. The firm also late last year announced the planned closing of 20 plants that employ a total of 2,400. Plastics materials plants in Belgium and Japan are among those to be closed.