Dow Chemical to reduce role in Kuwait JVs, plans new US Gulf MEG plant

Dow Chemical announced today that it intends to restructure its participation in its group of Kuwaiti joint ventures, with the objective of optimizing its investment and expanding its relationship with Greater EQUATE on the US Gulf Coast. 

This announcement aligns with Dow’s prior-stated commitments to optimize its investments in certain JVs, according to company officials.

The optimization is expected to occur in two phases. Under the first phase, EQUATE would acquire MEGlobal for a total equity consideration of $3.2 billion. The transaction will result in Dow receiving $1.5 billion in pre-tax proceeds. 

Following completion of this acquisition, which is expected to close by year-end 2015, Dow will retain a 42.5% ownership stake in MEGlobal through its ownership of Greater EQUATE. This acquisition is also expected to drive efficiencies and cost savings due to existing synergies between MEGlobal and EQUATE.

In the second phase, Dow and PIC have agreed that Dow will further reduce its overall ownership interest in Greater EQUATE. The target to complete this second phase of the transaction is mid-2016.

In a related move, MEGlobal will build a new MEG plant on the US Gulf Coast -- enabling MEGlobal and its parent companies to enjoy growth in a highly strategic region of the world and drive significant expansion of MEGlobal’s geographic footprint and capacity. 

Final location of the asset is contingent upon pending incentives, the company said.

“This announcement demonstrates Dow’s commitment to evaluate our joint venture portfolio to unlock value for shareholders and simultaneously expand our relationship with a key strategic partner,” said Andrew N. Liveris, Dow’s chairman and CEO. “This transaction allows Dow to maximize shareholder value, while maintaining our commitment to these industry-leading joint ventures.”

MEGlobal is a world leader in the manufacture and marketing of monoethylene glycol (MEG) and diethylene glycol (EG), and is headquartered in Dubai, UAE. Established in July 2004, MEGlobal currently markets over 2.5 MMtpy of EG globally. EG is used as a raw material in the manufacture of polyester fibers (clothing and other textiles), polyethylene terephthalate (PET) resins, antifreeze formulations and other industrial products. 

MEGlobal is a joint venture between Dow and the Petrochemical Industries Co. (PIC) of Kuwait.

Established in 1995, EQUATE is the operator of an integrated world-scale manufacturing facility producing more than 5 MMtpy of high-quality petrochemical products, including polyethylene, ethylene, and EG, that are marketed throughout the Middle East, Asia, Africa and Europe. Formed in 2004, The Kuwait Olefins Co. (TKOC) is an international joint venture among Dow, Petrochemical Industries Co. (PIC), Boubyan Petrochemical Co. (BPC) and Qurain Petrochemical Industries Co. (QPIC). EQUATE is the single operator of Greater EQUATE, which includes TKOC, The Kuwait Styrene Co. (TKSC), and Kuwait Paraxylene Production Co. (KPPC) under one integrated operational umbrella at Kuwait’s Shuaiba Industrial Area.

These transactions are subject to negotiation of definitive agreements and satisfaction of certain conditions, including obtaining and maintaining of certain customary regulatory approvals.