Dow Chemical has signed a definitive agreement to sell its global polypropylene business to a strategic buyer for $340 million, Chairman and CEO Andrew Liveris announced Wednesday during a conference call to discuss second-quarter 2011 earnings.
The divestiture of the PP business is consistent with Dow's long-term strategic business model, Liveris said.
"We are dampening volatility and putting our propylene into high-value end uses," Liveris said. "You can assume that by doing this deal, we are liberating ourselves to do that.
"We are taking what we make into our value-added, high-end uses like acrylics and epichlorohydrin and proplyene oxide."
Liveris did not immediately disclose the buyer or when the transaction will be finalized.
"That will come very soon," Liveris said of disclosing the buyer.
It remains unclear if the sale includes Dow's PP catalyst licensing business, which the company reportedly was hoping to sell separately.
Liveris said proceeds from the divestiture will be used to address company priorities, which include debt reduction.
The sale of Dow's PP business had been expected as the company hinted at a divestiture earlier this year.
The sale of its PP business will free up propylene to be used in the production of more valued-added applications, while at the same time lowering the company's buys, Liveris said.
In April, the company announced plans to construct two propylene dehydrogenation plants in the United States as part of an ambitious project to increase olefins production in the US and integrate operations into feedstock opportunities available from shale gas.
"This adds to the closure that when we are done with our second PDH unit, we will be 100% captive," Liveris said.
Earlier Wednesday, Midland, Michigan-based Dow Chemical reported Q2 net income of $982 million -- up $416 million, or 73%, compared with the $566 million posted in the same period of 2010 -- on the back of a combination of increased sales, volumes, and higher prices, the company said.
Net revenues were $16.046 billion, up $2.43 billion, or 18%, from Q2 2010.
Excluding divested interests, sales were up almost 28% compared with the Q2 2010 sales figure of $12.6 billion.
Sales in Plastics were $3.3 billion. Sales excluding divestitures increased 30% compared with the same quarter last year, the company said. Volume increased 10%, while price rose 20%.
The company said polypropylene enjoyed a significant sales increase in all geographic areas except Asia Pacific as broad-based, double-digit price gains in the packaging and hygiene and medical sectors were achieved in response to rising propylene costs.
The business reported robust demand in North America because of low inventory levels in the value chain and growing demand in automotive, consumer durable goods, and packaging end-markets.
Equity earnings for the segment were $65 million, compared with $59 million in the year-ago period. EBITDA for the segment was $751 million. In the same period last year, EBITDA was $696 million, which included a $10 million pretax gain on the divestiture of Styron.
