Chemical industry weekly news roundup, 14 November
10:40 AM MST | November 14, 2014 | By LINDSAY FROST
This Week in CW:
Dow Chemical held its investor day this week and made several announcements. The company says it plans to cut its stake in its Kuwaiti petrochemical joint ventures and sell its Angus Chemical subsidiary to private equity firm Golden Gate Partners for $1.2 billion. The company also announced plans to realign external reporting, increase its dividend, and expand a shareholder repurchase program. The strategy updates have not placated activist hedge fund Third Point, which announced at CW press time on 13 November, a few hours after Dow concluded the investor conference, that it was preparing for a possible proxy fight to gain seats on Dow’s board. Dow will cut its stake its MEGlobal and Equate petrochemical jv’s with state-owned Petrochemical Industries Company (PIC; Kuwait City). Dow says the Kuwait transactions will be completed by mid-2015. Dow also said that it will raise its quarterly dividend by 14%, to 42 cts/share, and more than double the size of its share buyback program. The company also announced earlier in the week that it will appeal a polyurethanes price-fixing class-action judgment to the US Supreme Court. In September, the US Court of Appeals for the Tenth Circuit affirmed a jury verdict awarding the plaintiffs $1.06 billion. Dow asked the court to rehear the case, but on 7 November, the court turned the company down.
Ballooning trade deficits and how Latin American can emulate North America’s investment boon with its own shale gas resources dominated discussion at the 34th annual meeting of the Latin American Chemical Industry Association (APLA), held earlier this week. Oil and gas have been Argentina’s primary energy supply for 50 years—accounting for 85% of energy production in 2011—but these resources are being depleted, says Marcos Sabelli of YPF. Argentina is ranked fourth worldwide in terms of unconventional gas sources. He compared Argentina’s Vaca Muerta—a large shale oil and natural gas field Repsol-YPF discovered in 2011—to the United State’s Eagle Ford formation. Unlike the US, which invested $65 billion in 2013 to add 12,000 wells nationwide, Argentina’s shale development is in its infancy, with just 2,500 wells in operation, in total.
Brazil's competition authority CADE (Brasilia) has rejected Braskem's proposed acquisition of Solvay's 70.59% stake in chlorvinyls company Solvay Indupa (Buenos Aires). The decision was taken during a public hearing held on 12 November, Solvay says. CADE announced in a preliminary ruling in June that the proposed acquisition was potentially anticompetitive because it would effectively create a polyvinyl chloride (PVC) market monopoly in Brazil and reduce the country's number of caustic soda producers from four, to three. Solvay says it still plans to divest Solvay Indupa as part of a broader strategy to reduce its exposure to the chlorvinyls industry.
US-President Obama has announced an ambitious 2025 target to cut net US greenhouse gas (GHG) emissions to 26–28% below 2005 levels by 2025. At the same time, President Xi Jinping of China announced targets to peak carbon dioxide (CO2) emissions around 2030, with the intention to try to peak earlier, and to increase the fraction of energy derived from non-fossil fuels to around 20% of the total energy mix by 2030.This is the first time that the Chinese government has promised a cap in total emissions and signifies a landmark development for the global climate change agenda, says IHS. To put China on track to reach this new target, however, substantial challenges lie ahead, IHS says.
Around the Web:
According to Science Daily, a new study shows that CEOs with extensive social connections initiate mergers and acquisitions more frequently, and these deals result in greater financial losses for both the acquiring firm and the combined entity. And, when compared to deals brokered by CEOs with less-extensive contacts, these deals result in greater financial losses for both the acquiring firm and the combined entity but greater personal benefit to the well connected CEO.
The Columbus Ledger Enquirer reports that the price of oil has taken another sharp drop as it appeared increasingly unlikely that OPEC members will cut production to reverse a plunge that is entering its fifth month. The lower oil prices are squeezing the revenue and profit of oil companies, but are still expected to give a lift to the US economy because airlines, shippers, and consumers are paying much less for fuel. Benchmark US crude fell $2.97, or 4%, to close at $74.21 Thursday afternoon. It is down 31% since late June to its lowest level since September of 2010.
According to Bloomberg, Exxon Mobil Corp. ceded its title as the world’s second-largest company to Microsoft Corp. after the five-month oil rout cut $47 billion from its market value. Exxon slipped 0.8% to $94.66, dropping for the third time in four days and reducing its overall value to $400.8 billion. Microsoft climbed 1.7%, extending an advance from its October bottom to 16%, pushing its capitalization to $408.9 billion. The flip-flop follows a 30% plunge in crude spurred by rising US supplies and a refusal by OPEC to reduce output.
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