Dow Chemical executives on Wednesday announced plans to sell off even more assets in the next two years, continuing a push to streamline operations and pull back from products that no longer fit within the company’s business strategy.
The multinational chemical corporation is on track to shed $4.5 to $6 billion in assets by the end of next year, and now expects to divest up to $8.5 billion by mid-2016, CEO Andrew Liveris said during a meeting with reporters in Lake Jackson on Wednesday.
That includes a decision also announced Wednesday to reduce the company’s stake in Kuwaiti joint ventures by the middle of next year. While Dow plans to retain a “substantial stake” in the MEGlobal and Greater Equate joint ventures, the pull-back is an effort to free up capital for new investments, Liveris said.
His comments kicked off a two-day forum between Dow executives and investors that will include a tour of the sprawling Freeport plant, where the company is investing billions on new expansions.
Included in the divestment strategy are plans to spin off about 40 percent of the company’s existing footprint in Freeport, including the company’s chlor-vinyl, chlorinated organics production and global epoxy business, as part of a decision unveiled in December to sell or spin off 40 manufacturing facilities at 11 sites.
Some in Freeport have worried how the divestment would affect the town’s largest employer where more than 4,500 people work.
Seeking to alleviate those fears, Jim Fitterling, vice president of business operations who is overseeing the transactions, told reporters on Wednesday that breaking off the Freeport assets into a separate company allows a new owner to focus solely on those operations, which would help strengthen the surrounding community, too.
About 800 people work in the divisions targeted for spin-off, but it’s not clear how their jobs would be affected because Dow is evaluating various potential ownership structures and partnerships.
Although a buyer hasn’t been identified, Fitterling said the company is making solid progress on the transactions, noting that the Freeport assets have garnered strong interest because of the plant’s close access to abundant shale gas, low-cost energy sources and salt caverns, which are mined for chlorine production.
Calling Freeport the “epicenter” of the nation’s chemical production, Liveris said the company remains committed to the plant there, pointing to the array of projects under construction, including a new ethylene cracker and new propane dehydrogenation unit to capitalize on low-cost gas, as well as two new plastics plants. Dow is also building a new campus called the Texas Innovation Center in nearby Lake Jackson, which will house research and development operations.
Aside from those multi-billion investments, which Fitterling described as the first wave of investment to capitalize the proliferation of cheap, abundant gas unleashed by the U.S. shale boom, Fitterling said Dow has no plans for further expansions through 2017 at the Freeport plant. But he said he sees the potential for a second wave of investment later on.