Global Processing

Dow Chemical Rises on Joint Venture

January 8, 2008
According to the Associated Press, shares of Dow Chemical Co. rose recently following news that the company sold a 50 percent stake in five of its global businesses for about $9.5 billion.

The stock rose $2.64, or 6.3 percent, to close at $44.39.

Dow Chemical, the world''s second-largest chemical company, expects the transaction with Petrochemicals Industries Co., a unit of state-owned Kuwait Petroleum Corp., to close in late 2008.

Under the terms of the deal, the joint venture will manufacture and market a variety of materials that include ethylenamines and ethanolamines, among others. Amines are used for purposes such as wood treating and coating.

Banc of America Securities analyst Kevin W. McCarthy said the deal will transform Dow''s portfolio and is only the beginning of more "transformational" deals.

McCarthy said the joint venture will bring growth opportunities, mostly in China, India and the Middle East.

Proceeds from the deal will be used to buy specialty assets to boost growth, McCarthy added, and not buy back stock.

"We are encouraged by continued portfolio transformation via Dow''s asset-light strategy and applaud the deal announced today," wrote McCarthy, who kept a "Neutral" rating on the stock.

Buckingham Research Group analyst John E. Roberts said a significant amount of the proceeds may be used for an acquisition.

Roberts, who has a "Neutral" rating on the stock, said the news is likely to lift shares, but not significantly because the deal has been expected for some time.