Dow Chemical Co said it would sell its Styron basic plastics unit to private equity firm Bain Capital Partners for $1.63 billion.

The sale of the unit, which makes latex, rubber and related plastics, would help the nation's largest chemical maker further bolster its balance sheet following the high-priced buyout of Rohm and Haas in 2009.

It also helps Dow move away from commodity chemicals and heightens its concentration in the higher-margin specialty chemical sector.

Bain bid in the second round of the auction for Styron alongside buyout firms TPG and Apollo , sources previously told Reuters.

Reuters had reported that Bain was about to strike the deal.

Midland, Michigan-based Dow will have the option to keep a 15 percent stake in Styron. The deal also includes $400 million in supply agreements, where Dow will feed Styron the materials needed to produce its plastics.

The deal is expected to close by August. Based on 2009 data, Styron is forecast to have $3.5 billion in annual revenue.

Styron has a large presence in Belgium but also has several locations elsewhere in Europe and in Asia and Latin America.

Dow has said it is targeting sales of $2 billion in nonstrategic assets this year.

Shares of Dow rose 71 cents, or 2.5 percent, to $29.40 in premarket trading.

(Reporting by Megan Davies and Ernest Scheyder; editing by John Wallace)