Braskem to buy global polypropylene business of Dow Chemical for $340mn
By Ben DuBose
Online Editor
(updated throughout with Braskem details)
US-based Dow Chemical has agreed to sell its polypropylene (PP) business for $340 million to Braskem, a move which makes Braskem the top polypropylene producer in North America.
Dow CEO Andrew Liveris first made the announcement on a conference call reviewing the company’s fiscal second-quarter earnings. The deal is comprised of $323 million in cash plus other cash and contingency assumptions of $17 million, Dow said.
The assets involved in the deal include two manufacturing plants in the US
and two in Germany, with a total annual
polypropylene production capacity of 2.3 billion pounds, officials with the Brazilian petrochemical major said.
The US plants are located at Freeport, Texas, and Seadrift, Texas, and will increase Braskem's polypropylene
capacity by 50% in the region to an annual production capacity of 3.1 billion
pounds.
The two plants located in Germany, at the petrochemical complexes of Wesseling and Schkopau, have annual capacity of 1.2 billion pounds of polypropylene.
"The acquisition of Dow's assets consolidates our leadership in polypropylene
in the US, the largest thermoplastic resins market, and it also enhances our
current position in Europe, an important market
for our biopolymers strategy," said Braskem CEO Carlos
Fadigas.
"In addition, as our 2nd acquisition in the US, this transaction will enable Braskem to capture approximately $140 million in synergies (net present value) through a more diversified portfolio, a more leveraged fixed cost base and working capital, logistics and supply optimization," he added.
The transaction is expected to close by the third quarter 2011 pending
regulatory approvals, officials said.
For Dow, Liveris said the deal amounted to 6.7 times earnings before interest, tax depreciation and amortisation (EBIDTA).
“This is yet another step along the line of putting our precious inputs, propylene in this case, into value-add outputs,” the CEO said.
"This divestiture is yet another strong example of Dow’s disciplined and ongoing approach to portfolio management and is directly aligned with our strategy to transform our performance plastics franchise to focus on downstream, technology-differentiated solutions,” Liveris continued.
"We are shifting our plastics portfolio from a commodity focus to that of a performance focus."
Under terms of the purchase agreement, Braskem will honor customer and supplier
contracts and related agreements, officials said.
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