The European Commission in Brussels, Belgium, approved a plan Nov. 8 that would permit Dow Chemical Co. to buy an 80 percent share of a petrochemical complex in the former East Germany, and rejuvenate it with a $6.77 billion subsidy from the German government. The approval was based on a subsidy that is $1.08 billion less than Dow and the German government agreed on in April.
Dow now will decide whether to pursue it, Marina Ashanin, a spokeswoman for Dow Europe SA said. Ashanin spoke by telephone Nov. 9 from Horgen, Switzerland.
Dow's April agreement with the German government has Dow buying an 80 percent interest in a steam cracker at Saechsische Olefinwerke GmbH in Boehlen, Germany; electrochemical units and derivative operations at Buna GmbH in Schkopau, Germany; and polyolefin operations at Leuna-Polyolefine GmbH in Merseburg, Germany.
Officially, the plants are known as BSL Polyolefinverbund GmbH. Collectively, they are referred to as Buna, based on their history as a part of the giant I.G. Farben complex that was dismantled after World War II.
Dow, of Midland, Mich., sees the facilities as a basis for new opportunities in Eastern Europe, while affording the company an opportunity to launch manufacturing of polypropylene resins.
``This is a very complex plan. We will know whether we can work with the approval and the conditions placed on it by the European Union after we review the documentation,'' Ashanin said. ``After we review what the conditions mean, we will decide whether we can move forward,'' she added.
Paul Raman, chemicals analyst for S.G. Warburg & Co. in New York, said in a telephone interview Nov. 9 he believes the primary change the European Commission made was to cut the allowable subsidy for the rejuvenation of the Buna works by $1 billion.
However, Raman said, even with the reduced subsidy, Dow stands to gain assets of $1.8 billion for a $1.25 billion investment. (Dow is getting 80 percent of assets valued at $2.25 billion for a $1.25 billion investment, Raman pointed out.)
Because of the significant value of the assets and the equally significant opportunities the Buna complex provides the firm, Raman said he believes Dow Europe will accept the conditions and go through with the deal.
Ashanin said Dow has not put a deadline on its review of the European Commission's approval and conditions, but said she expects the review period ``to be measured in weeks.''