Dow Chemical poised to increase stake in joint venture with Saudi Aramco

By: Anjli Raval

Dow Chemical, the US chemical and seeds company, has announced plans to increase its stake in Sadara Chemical, a joint venture with Saudi Arabia’s state energy giant. Both companies said on Monday they had signed a non-binding agreement that sets in motion a process by which Dow can acquire an additional 15 per cent share. Saudi Aramco currently owns 65 per cent of the company, with Dow holding 35 per cent. Financial terms of the transaction, which if concluded would see each company holding a 50 per cent stake, were not disclosed.

The Sadara plastics and specialty chemicals complex is made up of 26 facilities in Jubail, eastern Saudi Arabia, and is capable of producing more than 3m tonnes of products each year. Saudi Aramco plans to expand its petrochemicals operations as part of the kingdom’s efforts to overhaul its economy, develop new industries and generate revenues outside of core crude sales. The initial public offering of Saudi Aramco, planned for next year, is at the centre of this economic transformation. The company’s push to become a chemicals player could make it more attractive to potential investors, analysts say.

The announcement on Monday follows remarks made by Sadara’s chief executive Ziad al-Labban earlier this year in which he said Saudi Aramco sought to cut its share in the venture. Advisers to Saudi Aramco have been scrutinising each joint venture as part of the IPO preparations. Saudi Aramco chief executive Amin Nasser said: “The time is right to fully leverage Dow’s global leadership to further contribute to the Kingdom’s economic transformation.” Andrew Liveris, Dow’s chairman and chief executive, said increasing the company’s equity stake is “designed to capture growing consumer-led demand in our key end-markets of transportation, infrastructure, packaging, and consumer products in developing regions.”

https://www.ft.com/content/8e5d24bc-f5a6-3566-9be4-79ebf83e179e