Dow Considers Options for Infrastructure Assets – The Deal

Chemicals and materials giant Dow Inc. (DOW) is working with advisers to consider strategic options for its infrastructure assets along the Gulf Coast, three industry sources said.

The company has retained Goldman, Sachs & Co. and Citigroup Global Markets Inc. to help it structure and run a potential transaction involving the assets, two of the sources said. The banks have had the mandate for several months, though any formal communication to third parties may remain a few months off, the sources said.

While it’s unclear what Dow will bring to market in the Gulf Coast in the near term, the company is eventually expected to sell what could amount to some $5 billion worth of assets, one of the sources suggested. Buyers may begin to be engaged in the first quarter of 2024, the source also said.

Midland, Mich.-based Dow is looking to monetize infrastructure assets that are currently hard to quantify, given they have never before been owned by a third party or had a third-party fee structure set up around them, a second of the sources cautioned.

The extent of infrastructure assets Dow will ultimately sell couldn’t immediately be learned, but the company is expected to consider options for assets such as pipelines, water and emission treatment facilities, rail lines and some utilities, the source added.

Auction at a Glance:

• Goldman and Citigroup tapped to sell pool of infrastructure assets
• Assets expected to be worth up to $5 billion
• Prospective bidders include infrastructure funds, large PE firms and energy companies

Chemicals makers have considered infrastructure sales in the past, but there have been concern around future relationships with new owners and the chemicals makers, the second source said.

For example, if a company such as Dow were to sell a water treatment plant it needs to do business, and the new infrastructure owner begins to inadequately invest in the facility or wants to raise prices that Dow doesn’t want to pay, the chemicals maker can’t let the infra owner shut down its operations, the source opined.

A big part of why these types of processes have stumbled in the past has had to do with these relationships not being fleshed out well enough contractually yet, said the second source. The person added that this is among the reasons why the preparation process will likely be extensive and that the market may not see all of the assets Dow plans to sell in one package.