22 mars, 2007 18:20

Monday, March 19, 2007; Posted: 03:22 AM

The deal has been in the works for months. According to reports, both the companies are reviewing whether to have a 50-50 ownership structure, or to tilt ownership slightly to one side or the other.

Michigan, Midland-based Dow Chemical's chief executive, Andrew Liveris, last week noted rumors of the potential Indian tie-up, adding he would "neither deny, nor confirm" them. Meanwhile, Reliance Industries declined to comment on the possible agreement.

Presently, Dow Chemical operates in Middle East, China and Brazil and has begun expanding more aggressively in India. According to Wall Street Journal, Dow Chemical has been shifting production of basic chemicals to the Middle East and Asia, where natural gas, a feedstock for chemicals production, is relatively cheap, and where faster growth in consuming markets.

Dow Chemical spokesman, stated, "We will continue to invest in places like Europe and North America, but the primary investment is in some of the emerging economies".

In order to expand abroad, Dow Chemical is using a 'light asset' strategy that involves entering joint ventures with local partners in the basic chemicals business to reduce the amount of money it has to invest. The company, which considers joint ventures as the 'right at the heart of its agenda', is currently reviewing above 60 potential mergers and acquisition deals.

Reports stated that the possible agreement with Reliance would be structurally similar to earlier formed joint venture with a subsidiary of state-owned Kuwait Petroleum Corp. in 2004. As per the deal, Dow Chemical shifted basic chemicals assets in North America and Europe into two new joint ventures.

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.

DOW closed Friday's regular trading session at $45.25, down $0.55 or 1.20%, on a volume of 15.38 million shares.