Dow AgroSciences, a division of Dow Chemical (DOW) has now made six acquisitions in the last year to strengthen its seed business.
Dow AgroSciences LLC said today it is acquiring most of the assets of Sac City, Iowa-based Renze Hybrids Inc. for an undisclosed price. It will acquire all sales, marketing and agronomy assets related to the Renze brand as well as all soybean production assets. Renze operations manager Craig Williams will join Dow AgroSciences to lead the Renze business. The Renze family has formed a seed corn production company to provide hybrid corn for Renze.
This comes after the August deal to acquire Dairyland Seed Co. DowAg is a double digit earnings grower for Dow and the division that CEO Andrew Liveris is most excited about. Let’s look at some numbers.
Kuwait recently bought 50% of the commodity business from Dow for $9.5 billion in a deal that valued Dow at $38 billion vs today’s $28 billion market cap. Dow parlayed that investment from the low multiple commodity business into the Rohm & Hass (ROH) deal, a specialty chemical maker that commands a mid-teen earnings multiple.
ROH earned $661 million last year. At the 18 pe specialty makers are trading at (that is a discount to the 22 ROH currently trades at), that portion of Dow will be valued at $12 billion. Add in the $19 billion valuation of the commodity business and you have today’s markets cap.
That also means buyers of the stock today get the Ag business, Dow’s current specialty business and it various JV’s around the world FOR FREE. Oh yea, and a 5% dividend. Does anyone wonder now why Berkshire (BRK.A) and Warren Buffett recently became the largest shareholders?
Me either…
Disclosure (“none” means no position):Long Dow, none
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