Dow Chemical Co. is in talks with Reliance Industries Ltd about a potential joint venture that would broaden the US chemical giant’s presence in the developing world, according to people familiar with the matter.
The deal has been in the works for months, but the companies are still reviewing whether to have a 50-50 ownership structure, or to tilt ownership slightly to one side or the other, say those close to the matter.
In an interview, Dow Chemical’s chief executive, Andrew Liveris, noted rumours of the potential Indian tie-up, adding that he would “neither deny, nor confirm” them. A Reliance Industries’ spokesman said the company has no official comment on the possible deal.
Dow has been shifting production of basic chemicals to Asia, where natural gas—a feedstock for chemicals production—is relatively cheap, and where consuming markets are growing fast.
“We will continue to invest in places like Europe and North America, but the primary investment is in some of the emerging economies,” a Dow Chemicals spokesman said.
Dow has been pursuing what it has called a “light asset” strategy for expanding abroad. It involves entering joint ventures with local partners in the basic chemicals business to reduce the amount of money Dow itself has to invest. The Dow spokesman said the firm currently is reviewing more than 60 potential mergers and acquisition deals, adding that joint ventures are “right at the heart of our agenda.”
A potential deal with Reliance would be structurally similar to a joint venture Dow formed in 2004 with a subsidiary of state-owned Kuwait Petroleum Corp. Under that deal, Dow shifted basic chemicals assets in North America and Europe into two new joint ventures.
Mumbai-based Reliance Industries’ $20 billion in annual revenue comes mostly from gasoline refining and marketing, but it also has interests in petrochemicals, textiles and oil and gas exploration. It already is the world’s largest producer of polyester fiber and yarn, and one of the top 10 producers globally of petrochemicals.
Michigan-based Dow Chemical, also one of the world’s largest chemical companies, currently operates in West Asia, China and Brazil, and has begun expanding more aggressively in India.
Dow Chemical’s sales in the country were about $370 million last year, up more than 20% from 2005, but still only a tiny of its total revenue of $49 billion.
Dennis K. Berman in New York contributed to this story.