Dow to Sell Flexible Packaging Unit to Arkema for $150 Million

Dow Inc. has agreed to sell its flexible packaging laminating adhesives business to Arkema for $150 million, pending regulatory approval. The transaction includes five manufacturing sites and is expected to close by the end of 2024.

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Sakchi Khandelwal
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Dow to Sell Flexible Packaging Unit to Arkema for $150 Million

Dow to Sell Flexible Packaging Unit to Arkema for $150 Million

Dow Inc. (NYSE: DOW) has signed an agreement to sell its flexible packaging laminating adhesives business to Arkema, a leader in specialty materials, for $150 million. The transaction, which is expected to close by the end of 2024 pending regulatory approval, includes five manufacturing sites in Italy, the United States, and Mexico that will transfer to Arkema. The flexible packaging laminating adhesives business, part of Dow's Packaging & Specialty Plastics segment, generates annual revenue of approximately $250 million.

Why this matters: This deal highlights the ongoing consolidation and strategic repositioning within the specialty materials industry, which could have significant implications for the global supply chain and market competition. As companies prioritize sustainability and recyclability, such transactions may shape the future of the packaging industry and influence consumer choices.

The transaction value of $150 million represents approximately 10 times the unit's forecasted 2024 EBITDA. Dow will retain its water-based laminating adhesives and acrylic adhesives businesses in Packaging and Specialty Plastics, plus adhesive solutions in Dow Consumer Solutions and MobilityScience, which align with the company's market growth strategies. Jim Fitterling, Dow chair and CEO, stated,"In line with Dow's best-owner mindset, we are focused on proactively managing our asset portfolio to invest in businesses with competitive positions in attractive markets."

The sale aligns with Dow's strategy to focus on core, high-value downstream businesses and support its capital allocation priorities, including accelerating growth strategies and delivering long-term shareholder value. Fitterling added, "Proceeds will help us advance our long-term Decarbonize & Grow and Transform the Waste strategies designed to capture more than $3 billion in annual earnings growth by 2030." The flexible packaging market is expected to grow at a rate superior to GDP in the coming years, driven by the need for more sustainable and recyclable solutions.

For Arkema, the acquisition significantly expands its portfolio of solutions for flexible packaging, enabling the company to become a key player in this attractive market. The acquired unit offers a range of high-quality solutions for food and medical applications, in addition to industrial lamination. With five state-of-the-art production sites in Italy, the United States, and Mexico, the business has been one of the main historical suppliers ofsolutions to the packaging industry.

Thierry Le Hénaff, CEO of Arkema, stated, "We are very pleased to announce this beautiful acquisition, which perfectly fits Arkema's strategy to offer its customers innovative products with high technological content and to continue growing in the attractive adhesives segment." The acquisition is expected to generate around $30 million in EBITDA synergies within five years and will require approximately $50 million in implementation costs or investments over the next three years.

The transaction between Dow and Arkema highlights the ongoing consolidation and strategic repositioning within the specialty materials industry. As companies seek to optimize their portfolios and focus on core strengths, such deals are likely to continue shaping the competitive environment in the coming years. The flexible packaging sector, in particular, is set to experience significant growth as sustainability and recyclability become increasingly important considerations for consumers and regulators alike.

Key Takeaways

  • Dow sells flexible packaging laminating adhesives business to Arkema for $150 million.
  • Transaction includes 5 manufacturing sites in Italy, US, and Mexico.
  • Business generates $250 million in annual revenue.
  • Deal aligns with Dow's strategy to focus on core, high-value businesses.
  • Acquisition expands Arkema's portfolio of flexible packaging solutions.