Changes continue at Dow Chemical Co., as the global plastics leader plans to sell off a newly formed unit that includes its styrenics and polycarbonate holdings.
The unit named Styron Corp. will include Dow's polystyrene, PC, ABS, styrene acrylonitrile, styrene monomer, styrene butadiene rubber and latex assets. Those businesses have annual sales of about $5 billion. Officials at Midland, Mich.-based Dow hope to sell the unit for between $1 billion and $2 billion.
Until a buyer is found, the unit will have its own chief executive and chief financial officers, overseeing 1,500 employees at 40 plants worldwide. The unit also will include Dow's 50 percent share in Americas Styrenics LLC, the PS/styrene joint venture that was formed with Chevron Phillips Chemical Co. LLC in 2007.
These are good quality businesses with good earnings, Dow Chairman and CEO Andrew Liveris said in a July 30 conference call. But they're simply not core to our future direction.
Dow ranks as the world's largest PS maker, based on annual capacity, with a market share of about 13 percent. Americas Styrenics also leads the North American PS field, based on annual sales, with a market share of about 30 percent. In styrene monomer, the new Styron unit will rank second in global capacity and be tied for the top spot in North American sales.
Longtime Dow executive Mark Remmert will serve as Styron's CEO, with fellow Dow veteran Celso Goncalves serving as CFO. Remmert most recently led Dow's engineering plastics business, while Goncalves was senior business finance director for Dow's portfolio optimization efforts. Both executives have been with Dow for more than 30 years.
During the conference call, Liveris also said that Dow continues to talk with potential partners in Kuwait and at two other state-owned firms about a joint venture involving Dow's olefins and derivatives business, including polyethylene. A similar deal with a Kuwaiti-owned firm fell apart late last year.
Dow also announced on July 30 the sales of its stake in Optimal Group of Cos. a group of three Malaysian-based joint ventures making plastic feedstocks and other specialty chemicals for $660 million to Petroliam Nasional Berhad (Petronas), Malaysia's state-owned gas and oil company. Petronas had been Dow's partner in the group.
Dow also unveiled a new operating segment lineup. In the new lineup, Basic Plastics including PE and polypropylene is in the Basics segment, along with Basic Chemicals and Hydrocarbons & Energy. Performance Products including most of Dow's specialty plastics is in the Performance Products and Systems segment, along with Performance Systems. Combined, Basic Plastics and Performance Products account for about $27.3 billion in annual sales more than 40 percent of Dow's annual sales total.
Dow, one of the world's largest plastics and chemicals firms, is in the process of re-inventing itself under an asset-light strategy, with a target of generating two-thirds of its sales from specialty businesses. The potential JVs are part of that strategy.
Dow's moves were met with a mixed reaction from stock analysts at Bank of America Merrill Lynch in New York. We like Dow's ongoing portfolio transformation from commodity to specialty chemicals, they wrote in a July 31 note to investors. However, we remain concerned with a slow pace of economic recovery in developed markets, given excess industry capacity in key commodities.
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