Dow Ag Sale Update

Thankfully this is looking far less likely every time the subject comes up…..

From the Q2 earnings call:

Don Carson – UBS

Thank you. Andrew, question on Dow AgroSciences. You mentioned that, you are now thinking that you, because of its growth, it should be an ongoing part of the Dow portfolio. Is that really reflect the fact that you are not able to get the kind of strategic premium that you think the business is worth?

Andrew Liveris

Don, we have obviously always carefully positioned ourselves here on Dow AgroSciences and that continues on this call. Dow AgroSciences is a very, I would say valuable property to everyone we’ve talked to and of course that includes, how we view Dow AgroSciences and we were very, very deep into a full divest process, because frankly, there was no choice a few months ago.

During that period of time, we had to make a lot of decisions about how much of that process would go all the way versus our alternatives. As we undertook that process, it was clear there were buyers out there that viewed this property with the same value that we viewed it, but obviously, negotiations didn’t get down to an exclusive. We believed that, if it went that far, that we would definitely realize a good valuation on Dow AgroSciences.

The key question really, is would that be good for Dow’s shareholders and when I say that, the EBITDA potential of Dow AgroSciences demonstrated and into the future feeds our income stream and our ability to be an earnings growth company and helps us on our gross debt-to-EBITDA ratios. So, it’s counterintuitive to sell it at anything less than a full premium and I think that’s really the mindset we are in right now.

We are still having ongoing discussions. They include part monetizations and they include strategic alliance with key players in the sector and we are still maintaining full optionality on that unit and at this point in time, though as I said on the remarks, my personal preference is to retain it in the portfolio and seek enhanced collaborations with others.

Don Carson – UBS

As a follow-up, do you think if you retain it in the portfolio that it will be properly valued in what’s really not obviously in Ag portfolio or is that why you also consider options like a partial monetization, partial IPO?

Andrew Liveris

Yes, I think your question answered your question. I mean, in essence the way you phrased the answer is exactly the way we think about it, Don.

Here are my thoughts from the May when the initial possibility of selling Dow Ag was announced.

Bottom line, it cannot and will not be sold even at “full value”. Right now the only scenario I see that may happen is a partial IPO. I would be a buyer of that IPO as the products in Dow Ag’s pipeline are simply awesome and will propel earnings for years. That is a scenario I could live with, it is not ideal, but I could stomach it as long as I could participate in the IPO.

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