Kuwait's Petrochemical Industries has agreed to form a multibillion-dollar U.S.-based joint venture with
that will make and market a variety of chemicals.
The venture will produce polyethylene, ethylenamines, ethanolamines, polypropylene and polycarbonate and is expected to have annual revenue of more than $11 billion.
Following the news, shares of Dow were rising 8.5% Thursday to $45.28.
The products in the venture have a variety of uses. For example, polyethylene is the most widely used plastic and can be found in products ranging from food packaging, milk jugs and plastic containers to pipes and liners. Polypropylene appears in fibers, packaging films, nonwovens, durable goods and automotive parts.
Dow first will sell half of its plastics assets to Petrochemical Industries, a unit of Kuwait Petroleum Corp. Both sides will then put their respective plastics holdings in the equally owned venture. They expect to complete the deal in late 2008.
The value of the five Dow businesses that will go in the venture is approximately $19 billion. As a result, Dow will receive roughly $9.5 billion, pretax, from Petrochemical Industries.
"We're creating a petrochemicals company that will be a global leader from its first day of operation, an $11 billion company that is well positioned to grow profitably across the industry cycle," Andrew Liveris, Dow's chairman and CEO, said in a statement.
The new business will employ more than 5,000 workers, and the pact is the latest in a series of arrangements that have seen Arab states take advantage of their oil dollars to scoop up Western assets.
Petrochemical Industries will provide hydrocarbons for the venture.
"By selectively investing in downstream petrochemical businesses, we are maximizing the value of Kuwait's hydrocarbons resources while diversifying our national economy and increasing job opportunities," Saad Al-Shuwaib, CEO of Kuwait Petroleum, said in a press release.