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Dow, Saudi Aramco to Restructure Ownership in Sadara JV

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The Dow Chemical Company (DOW - Free Report) has signed a Memorandum of Understanding (MOU) with Saudi Arabian Oil Company (Saudi Aramco) for a potential restructure of equity ownership in their joint venture – Sadara Chemical Company. The MOU sets forth a process for Dow to purchase an additional 15% ownership interest in Sadara from Saudi Aramco.

Dow currently owns a 35% equity stake in Sadara with Saudi Aramco owning 65%. The proposed transaction, if eventually completes, Dow  and  Saudi Aramco would each own a 50% stake in Sadara. The expected financial impact of the potential restructuring has not been divulged.

The potential ownership restructure would occur after the planned separation of the Materials Science Company within 18 months following the completion of the merger between Dow and DuPont (DD - Free Report) on Aug 31 or Sadara’s completion of the Creditors’ Reliability Test, whichever is later.

Sadara is the world’s biggest integrated chemicals complex built in a single phase. The facility comprises of flexible cracking capabilities and is expected to manufacture over 3 million tons of high-value performance plastics and specialty chemical products annually.

Saudi Arabia aims to diversify the economy with the inclusion of Sadara, which will add value to the existing petroleum reserves and manufacture chemicals that are not currently produced in the Middle East. Moreover, Sadara will increase employment in the region.

Sadara, earlier this month, completed the commissioning of the last of its 26 plants, marking an important milestone for the massive chemicals facility. The last commissioned plant is an isocyanates section currently making crude quantities of toluene di isocyanate (“TDI”) and other specialty chemicals.

Dow has been investing in Saudi Arabia for over four decades. The company is one of the largest foreign investors in the nation. Sadara is in line with Dow’s initiative to grow in the Asia Pacific, Middle East, India, Africa as well as Eastern and Central Europe with cost advantages. The company aims to expand in markets including packaging, electronics, construction and transportation. Sadara will cater the needs of Dow’s customers in the Asia Pacific, India, the Middle East, Africa and Central and Eastern Europe.

Dow has outperformed the industry it belongs to over a year. The company’s shares have gained around 19.8% over this period, compared with roughly 16.8% gain recorded by the industry.


Dow is witnessing improved global economic activity with strong momentum in manufacturing, investment and trade. The company believes that it is well positioned to capture demand in consumer-led markets.

Dow currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-placed companies in the basic materials space include The Chemours Company (CC - Free Report) and Kraton Corporation , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected long-term earnings growth of 15.5%.

Kraton has an expected earnings growth of 7.2% for the current year.

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