Dow Chemical to divest non-core assets to raise $3 to $4 bn

US chemical giant Dow Chemical Co yesterday said that it plans to raise at least $3 billion to $4 billion by selling non-core assets in order to create shareholders value.

''We have identified targets and are moving forward with defined divestiture plans – actions valued at a minimum of $3 - $4 billion. The proceeds of these divestitures will create further capacity for the company to generate returns to shareholders,'' said Dow's chairman and CEO, Andrew Liveris, while announcing third-quarter results.

Early this month the Michigan-based company raised $500 million by selling sell its polypropylene licensing and catalyst business to its smaller rival W R Grace & Co as part of its March 2012 plan of divesting nearly $1.5 billion in assets by mid to late 2014. (See: Dow to sell polypropylene licensing, catalyst business to W R Grace for $500 mn)

Dow Chemical, the largest US chemical maker by sales, had said in August that it may divest its epoxy business, European building and construction and commodity chlorine derivatives businesses, which together contribute $6 billion to annual revenue.

Dow has already divested non-core businesses worth about $8 billion in revenue since 2009.

The divestiture includes Dow's polypropylene catalysts manufacturing facility at Norco, Louisiana, and customer contracts, licenses, intellectual property and inventory.

Dow Chemical's third-quarter revenue rose 1 per cent to $13.73 billion, while net income rose to $594 million.

The company generated more than $1.4 billion in cash flow from operations in the quarter, representing nearly $300 million, or 27 per cent, increase versus the year-ago period. Year to date, Dow has generated $5.6 billion in cash flow from operations, representing an improvement of nearly $3.1 billion compared with the prior year. 

It said that it has reduced gross debt by $200 million in the quarter and $2.4 billion year to date, resulting in a nearly $120 million decline in interest expense year to date.

Since 2010, Dow has reduced its debt by $5.2 billion and its interest expense by more than $300 million.

The company's net debt to total capitalisation now stands at 34.7 per cent.