Dow chemical (DOW) has given an update on the bridge loan it used to pay for the Rohm & Haas deal and changed the rhetoric on the possible Dow Ag sale.
At the recent annual meeting of shareholders CEO Andrew Liveris said Dow’s focus through the end of the year will be to pay down the bridge loan and deleverage the company, run the business effectively and integrate Rohm and Haas to begin growing once again.
Originally, Dow had planned have the Rohm purchase bridge loan of $9.5 billion down to a balance of $4.2 billion in 90 days. As of last Thursday the loan is now down to $3 billion, meaning $1.2 billion additional has been paid off 55 days ahead of schedule according to the company.
Dow said it continues to look at its options to sell units. In addition to over $3 billion from the sale of Morton Salt, TRN, Calcium Chloride and other units, Dow is considering raising $4 billion to $6 billion from businesses in a successor to the K-Dow Petrochemicals deal or regional agreements; $1 to $2 billion from aromatics and derivatives.
Liveris repeated the company position that AgroSciences is a growth unit that is valuable to Dow, and would only be sold if a full-value offer is made ($15 billion). they also gave the usual boilerplate disclaimer that they are “still assessing its options” to keep the business, create a joint venture or sell it outright. This is a slightly harder line on the unit that when the original announcement was made that “all options are on the table”. At that time there was very little talk of price for the unit and it was stated that there were “several” interested parties.
I don’t think it is a great leap to assume those parties perhaps assumed they could pick up an incredibly valuable asset on the cheap from a distressed seller. I think it is also the reason not long after we saw both the equity and debt offerings and no additional mention of a DowAg sale. If the above is true, then Liveris does deserve kudos for not dumping the unit and holding firm on price. All that being said, even a full value sale of it is unacceptable.
The joint venture makes sense and since they already have one with Monsanto (MON), they would be a powerful partner. It would aid in cost reductions/capex and produce the clear industry powerhouse. what would remain would be looking at the composition of it.
Dow also announced today that it will increase the off schedule price in all regions for the product lines of both Acrylic Monomers and Vinyl Acetate Monomers effective June 1, 2009, or as contracts allow. The increases are $0.03/lb or $66/MT for Acrylates and Vinyl Acetate Monomers and $0.04/lb or $88 MT for Methacrylate and Specialty Monomers. This too is good news as price increases do mean some demand is coming back into the system.
Now, it is only 1 increase and we need to see if it sticks and if other products follow suit. Never the less, it is good news.
Disclosure (“none” means no position):Long Dow, none