Dow Ag's Sale Looking Unlikely

Dow Ag (DOW) is not behaving like a company that is up for sale...

The Indianapolis Business Journal Reports:

Dow Agrosciences LLC said today it is acquiring the majority of assets of Illinois-based seed corn company Pfister Hybrids.

A sale price was not disclosed.

Under the terms of the agreement, Indianapolis-based Dow AgroSciences, a subsidiary of Dow Chemical Co. in Michigan, will acquire the Pfister brand and the sales and marketing areas, as well as the warehousing and administrative services. The Pfister brand will continue, and the company still will be headquartered in El Paso, Ill.

Pfister President Linda Brown will assume the title of general manager.

The addition of Pfister Hybrids will further expand Dow AgroSciences’ current seeds business in the United States as it anticipates introducing insect protection and weed control, and herbicide tolerance, technology within the next few years, the company said in a written statement.

“At Dow AgroSciences investing in innovation is the key to our future, and we look forward to building upon the Pfister tradition,” said Stan Howell, vice president, North America regional commercial unit for Dow AgroSciences.

Dow AgroSciences has global sales of $4.5 billion.

Pfister Hybrids was founded in 1936.

I've been adamantly opposed to a Dow Ag sale since it was first broached back in May. Since then Dow has risen funds through alternative channels and seems to be backing off the outright sale talk . These are all very good developments.

So, what would be acceptable? A partial IPO of Dow Ag would do, should it be absolutely necessary. What would be even better would be if they offered it to current shareholders first then sold any excess to the public (there would not be any).

Anyway, not often do we see a company about to be sold making acquisitions. That is the good news. It says to me that the "sale" of Dow Ag is becoming a more remote possibility as each days passes....

Disclosure: Long Dow

Comments

[winnersdon'tquit]

What with the emerging markets growing demographics and affluence, it was difficult to comprehend DOW's announcement originally, that they were considering the agri div.sale. It made no sense then..., and it makes no sense now!

2009 Jul 16 07:37 AM

[Brian McM]

Todd, what you are talking about is a tracking stock. That is one way to get some value (cash) out of subsidiary that is not core to a company's long term strategy, but has very good appreciation potential.

Dow was aggressively trying to raise cash late last year and early this year to pay for the off-again, on-again acquisition of Rohm and Haas (after the aborted partnership with PetroChemical Industries of Kuwait). Dow was finally able to raise enough capital to ease the debt burden by selling equity in Dow to BRK-A, the Haas family trust and the government of Kuwait (who ironically nixed the deal with its own chemical company).

I agree with you that DOW should stay in the Ag market. Ag, especially the genetic engineering portion of ag, offers a very good long term profile. The Asian and Indian economies are advancing rapidly and with their development comes a taste for Western style diet with lots of protein-based products. Whether it is wheat, corn, or soy, all those cultivated products require improved seeds and more chemicals. This is the same reason that Dupont and Monsanto are good long term prospects, along with the fertilizer plays like Agrium, Potash and Mosaic.

This would not be a first for DOW which formed a joint venture with Corning Glass in 1943 and spun out half the ownership in return for cash. They still own a large share (50%) of the resulting specialty chemicals / silicon products company Dow Corning.

2009 Jul 17 01:14 AM