Dow Ag Still Up For Sale?

I thought we had put this to bed but this little item in the South China Morning Post caught my attention:

China National Chemical Corp, the mainland’s largest chemicals maker, has returned to the bidders’ table after Dow Chemical (DOW) restarted an auction for its agricultural chemical unit, Dow AgroSciences, which could fetch as much as US$7 billion, market sources said pitting ChemChina against Monsanto and Switzerland’s Sygenta, the world’s biggest farm chemicals maker. Sources told the paper that the odds are against a successful acquisition by ChemChina, as Monsanto (MON) and Sygenta’s businesses are more in line with those of Dow AgroSciences. ChemChina has previously rejected offers of a minority stake in the unit, favoring a takeover or joint venture. Chinese chemical firms such as Sinochem, Sinopec and ChemChina have been pursuing overseas acquisitions to expand their product offerings.

We need to look back here. 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 mid-May, 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.

Dow has also since then announced another $900 million in asset sales

Based on that, there is no reason to sell Dow Ag, none. If the goal is truly to turn Dow into a stable earnings growth company, the Dow Ag must be an integral part of the finished product. Further, when one considers the current market we are in, selling an asset like Dow Ag into it is not going to garnish full value for the seller. If the unit must be even partially sold, doing it a year from now when we are further into the recovery would reap far more value for shareholders.

Now, this still may just be taking bids to see if an “offer we can’t refuse” is submitted or to garner concrete value for a partial IPO. Still, when perhaps the most valuable part of a company is even being mentioned in a sale process, investors are wise to keep close tabs on it.

Disclosure (“none” means no position):Long DOW ,none