The Dow Chemical Company (NYSE:DOW) on Wednesday reported it would divest its polypropylene production unit to Brazil’s largest chemical company Braskem for $340 million in a cash deal.
Braskem said it would pay $323 million in cash for the business and contingency assumptions of $17 million.
The deal, expected to close by third quarters’ end, is pending approval. Dow said it expects to make a gain from the divestment.
Dow also said both companies will continue to evaluate potential future collaborations on growth opportunities related to their strategies.
"This business has delivered historic margins that do not meet our expectations moving forward and is no longer core to Dow's strategy. We are shifting our Plastics portfolio from a commodity focus to that of a performance focus,” said Chief Executive Andrew Liveris.
The deal includes Dow's polypropylene manufacturing facilities at Schkopau and Wesseling, Germany, and Freeport and Seadrift, in Texas. Also included are inventory, business know-how, certain product and process technology and customer contracts and lists.
Dow said 200 employees are expected to transition employment status to Braskem by transactions close.
In other financial news, for the three months ending June, Dow posted profits of $1.07 billion, or 84 cents a share, up from $651 million, or 50 cents, from the year-earlier quarter.
The company said revenue rose 18% to $16 billion from $13.6 billion due to a 14% growth in volumes in emerging markets.
Analysts had expected earnings of 79 cents, according to Thomson Reuters.
Emerging-market sales hit $4.9 billion, led by 35% growth in Latin America, the company said.
"Dow's broad geographic reach and leadership in many attractive, high-growth end-markets firmly position us to benefit from the megatrends that are defining our future," said chairman and chief executive Andrew Liveris in a statement.
"On the whole we see growth continuing to gain traction in developed markets, albeit at a somewhat uneven and jagged pace given persistently high unemployment in the United States and sovereign debt concerns in Europe."