Tag: dow

A couple updates on new Dow Chemical (DOW) JV’s.

Dow Izolan, a joint venture between Dow Chemical and Izolan (Vladimir, Russia), has broken ground on a polyurethane (PU) systems plant at Vladimir. Dow says the plant will help meet demand from the “fast-growing” appliance, automotive, construction, consumer products, and furniture markets in Russia. The facility is due onstream in mid-2009.

Saudi Aramco and Dow’s giant Ras Tanura petrochemical faces delays as the sheer size of the project complicates design, the Middle East Economic Survey (MEES) reported.

Dow’s investment in the plant, estimated at $22 billion, will be the largest single foreign investment in Saudi Arabia’s energy sector. The plant, due to begin production in 2012 had awarded KBR (KBR)the front-end engineering and design contract for the plant in July 2007, but that contract will be split and partly awarded to another company, MEES reported, citing industry sources.

“Around 2 million man hours of work, covering utilities and offsites and some aromatics units have been taken off KBR and will be given to another firm, leading to delays,” the weekly MEES reported.

I’m not sure this really qualifies as a “delay” as the original time frame for the project was 2011-2012. I am guessing that the 2011 part of the equation isn’t going to happen. Not really all that big a deal as they are still in the ballpark and a whole lot of time can be made up between now and 2011.

The Russian JV shows a ton of promise. It is also fraught with risk due to Putin. One has to consider the very real lesson Mr. Putin learned the past couple week watching his country’s stock market and currency plunge after the Georgian actions. Far from politician’s teaching him a lesson, the market will enact a far more severe cost to him. That being said, one can only hope the reality of the world he now lives in is sinking in.

That being said, the Russian JV is not critical project like Ras Tanura but event in Russia will now bear a closer eye. One can only hope markets have taught Putin a lesson he needed to learn.

Disclosure: Long Dow
Visit the ValuePlays Bookstore for Great Investing Books

Eastman Chemical (EMN) a basic chemical company, currently $4 off its 52-week low, trades with a forward P/E of 11, a PEG ratio of 1.8 and EV/EBITDA of 5.9.

Eastman expects earnings to more than double in the next five years, going from roughly EPS of $5 to $6 in 2008 to $10 to $11 in 2012. If that happens, Eastman should trade north of $110 by 2012 based on the above metrics.

Specialty chemical maker, Huntsman (HUN), trades with a forward P/E of 15 and an EV/EBITDA of 9.1.

Dow Chemical (DOW), the largest chemical producer in the world trades with a forward P/E of 12.01, a PEG ratio of 2.22 and EV/EBITDA of 6.807. The company also sports a large and growing dividend of 4.9%. Now Dow cannot technically be classifieds as a “specialty” chemical maker until after the Rohm & Hass deal closes and the Kuwait deal is finalized. Q4 or Q1 2009 should be the time frame for both.

Dow currently is valued in the middle of the two since it isn’t really either at this point. Once the above deals close, Dow’s valuation will move towards Huntsman’s which ought to push a 30% move into the stock just based on the re-valuation.

Perhaps this what Berkshire’s (BRK.a) Warren Buffet saw when he became the company’s largest shareholder?

On another front. After the Rohm & Hass deal is finalized, look for Dow to begin to expand operations in India. Dow currently imports most of its products to India, but has ts sites set on changing that. “The country is attractive enough to invest…it could be large,” Dow Chemical International President and CEO Ramesh Ramachandran said recently. “For us, large could be billions of dollars,” he said when asked to specify. “At some point we have to start manufacturing here, particularly for specialty chemicals,” he finished.

Specialty is Rohm and the direction CEO Andrew Liveris is taking the company..

Disclosure (“none” means no position):
Visit the ValuePlays Bookstore for Great Investing Books

For those who think the price Dow Chemical (DOW) paid for Rohm & Haas (ROH) was too high, it turn out there were two other bidders in the same ballpark, BASF (BASFY) and another.

Chemical Week Reports (sub. required)

Rohm and Haas (R&H) approached Dow Chemical and two other companies in early June to gauge their interest in acquiring R&H, a move that resulted in Dow’s July 10 acquisition agreement, says a recent R&H SEC filing. The surprise move late last year by the Haas family trusts, which control 32% of R&H shares, to seek the sale of its stake was the driver behind the R&H sale. Dow’s $18.8-billion, or $78/share, bid bested a $75/share offer from another chemical maker identified in the filing only as “company A.” BASF told CW last month that it placed a bid but declined to reveal the amount of its offer (CW, July 7/14, p. 7).

Haas trusts representatives told R&H chairman and CEO Raj Gupta in November 2007 that the trusts would seek to sell “all or substantially all” of their holdings within 12-18 months, the filing says. “Based on the trusts’ prior conduct, the company’s board of directors did not anticipate the request of the Haas trusts,” the filing says.

R&H and its financial adviser Goldman Sachs (New York) discussed several steps during the next six months to address the sale or purchase of the trusts’ holdings as well as other possible alternatives including putting R&H up for sale, the filings say. The group held discussions in April and May regarding R&H repurchasing a small percentage of the trusts’ shares as part of a deal that called for the trusts’ remaining holdings to be sold over a three-year period, R&H says.

R&H’s management maintained a strong desire to remain independent through negotiations, but management and the board were concerned about market and industry reaction to a sale by the trusts, the filings say. In early June, Gupta held separate discussions with Dow chairman and CEO Andrew Liveris as well as the CEO of company A, believed to be BASF, regarding their interest in R&H, the filings say. Gupta subsequently had a similar conversation with the third company’s CEO, it adds.

Dow responded with an initial offer of $74/share on June 16, which prompted R&H to conduct a “targeted process” among Dow and the two other potential acquirers, the filings say. Company A responded with an offer of $70/share. R&H requested definitive acquisition proposals, which resulted in a $76/share bid from Dow, and a $75/share bid from company A. R&H once again contacted the two companies seeking higher bids.

Dow submitted a $78/share bid on July 9, and company A submitted a revised agreement that improved certain terms but did not increase its offer, R&H says. Dow and R&H signed a definitive agreement that included a voting agreement with the Haas trusts.

In the very near future shareholders will be sitting back enjoying the fruits of this deal….very near…

Disclosure (“none” means no position):long Dow, none
Visit the ValuePlays Bookstore for Great Investing Books

Oil, In-Laws, History, Mobil TV

– Here is the reason for the high prices

– You think your in-laws are bad?

– This is an interesting article on the Fed and history

– I already have some of this with Sprint

↑ Grab this Headline Animator

Visit the ValuePlays Bookstore for Great Investing Books

Watch this interview. Dow (DOW) CEO Liveris has a calmness about him I have not seen in a while. Gone is the pre-Rohm deal urgency he always had on camera. Sometimes what you don’t see matters more than what you do.

Here is the video:

I think it is due to the Rohm & Hass (ROH) deal and his discussion with Chinese officials. Liveris had promised shareholder he would transform the company’s earnings profile and the Rohm deal allowed him to do that overnight.

Rather than impressing on people the value proposition Dow holds for investors due to the actions they are undertaking and going to take, Liveris seems almost content now to sit back (not literally), watch the inevitable happen and then bask in the glow of a job well done.

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

↑ Grab this Headline Animator

Visit the ValuePlays Bookstore for Great Investing Books

Remember that word? Switchgrass? It was touted as being able to fuel massive amounts of ethanol production because it can be planted just about anywhere, has short growing seasons, is not a food source and requires almost no fertilizer. Well, we may be getting closer…

Biomass Magazine reports
“Cambridge, Mass.-based Metabolix Inc. (MBLX) has created a variety of switchgrass that produces significant amounts of polyhydroxyalkanolate (PHA) bioplastics in leaf tissues. The company incorporated multiple genes into the switchgrass genome resulting in a new functional multi-gene pathway in switchgrass. Metabolix recently completed greenhouse trials showing that economically significant amounts of PHA and biomass could be produced by its new varieties.

“Metabolix has been developing technology to produce PHA polymer in switchgrass for over 7 years,” said Dr. Oliver Peoples, chief scientific officer for Metabolix. “This result validates the prospect for economic production of PHA polymer in switchgrass, and demonstrates for the first time an important tool for enhancing switchgrass for value-added performance as a bioenergy crop.”

Switchgrass has been identified by the U.S. DOE and USDA as a prime feedstock for producing next generation biofuels and bioproducts. The 2007 Energy Independence and Security Act mandated 16 billion gallons of ethanol must be produced by biomass crops, such as switchgrass, by the year 2022.”

Metabolix, Inc. is a biotechnology company that develops and focuses to commercialize alternatives to petrochemical-based plastics, chemicals and energy. Its first platform, which will be commercialized through a joint venture with Archer Daniels Midland Company (ADM), is a large-scale microbial fermentation system for producing a family of naturally occurring polymers known as polyhydroxyalkanoates, which was branded under the name Mirel.

The Company’s second technology platform, which is in an early stage, is a biomass biorefinery system using plant crops to co-produce both bioplastics and bioenergy. The Company is focused on developing entire production systems from gene to end. To exploit its first technology platform, the Company is working with ADM to build the Commercial Manufacturing Facility in Clinton, Iowa. This is also the home of ADM’s new ethanol expansion. Coincidence?

ADM currently hold 5.4% of Metabolix’s outstanding shares.

The news here is that switchgrass is becoming commercially viable. It will be a dirt cheap input for bioplastics and eventually biofuels.

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

↑ Grab this Headline Animator

Visit the ValuePlays Bookstore for Great Investing Books

Dow Ag, a division of Dow Chemical (DOW) has reached an agreement to acquire Wisconsin based Diaryland Seed Co., one of the nations largest independent seed companies.

Terms were not announced and the deal is expected to be finalized next month.

By acquiring Dairyland, Dow will boost its soybean and alfalfa breeding program and expand seed sales in the northern Midwest, where the family owned 101-year-old Dairyland is a well-known brand to farmers.

This is Dow’s 5th seed-related acquisition in the past year. The seed business Dow has built currently is strong in corn, sunflowers and cotton and now that is being expended into soybeans and alfalfa with the purchase. Coming into 2010 is the introduction of Smartstax, the first 8 trait genetically engineered seed developed in conjunction with Monsanto (MON).

Dow Ag is growing earnings 15% to 20% annually and with recent (and future) acquisitions and perhaps the largest product launch yet on the horizon, that growth looks to be able to grow unimpeded for at least the next several years.

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

↑ Grab this Headline Animator

Visit the ValuePlays Bookstore for Great Investing Books

A week after Director John Hess purchased 30,000 shares on the open market, CIO David Kepler purchased 10,00 shares at $32.12 each bringing his direct ownership to over 70,000 shares

SEC filing

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

↑ Grab this Headline Animator

Visit the ValuePlays Bookstore for Great Investing Books

Some interesting thoughts on the earnings call last week

An interesting back and forth regarding Dow (DOW) and Rohm & Hass (ROH)

Jeff Zekauskas – J.P. Morgan
“I don’t know if you noticed, but there’s some possible consolidation among your acrylic suppliers.”

Christopher M. Connor
“Wow, we hadn’t heard.”

Jeff Zekauskas – J.P. Morgan
“What do you make of that? And do you think that that — you know, is that neutral for Sherwin or negative or positive?”

Christopher M. Connor
“Well, time will tell. I guess I would comment on Dow and Roman Haus that both of these companies have had longstanding relationships with Sherwin-Williams. They are important suppliers to us. They’ve been very good companies to deal with and we expect that that relationship will continue and time will tell whether this is a positive, neutral, or negative — too early to make that call.”

Jeff Zekauskas – J.P. Morgan
“Would you have any interest in integrating into acrylics?”

Christopher M. Connor
“Again, too early to make that call.”

The follow up question ought to have been “any thoughts on becoming part of Dow Chemical?”

On Domestic and International Acquisitions:
Donald Carson – Merrill Lynch
“Okay, and then a capital structure question — you said you haven’t really changed your view yet post the successful resolution of the pigment litigation to lever up a bit more. Is that partly because you are trying to keep your powder dry for acquisitions? And what is the acquisition environment? Are some of the smaller companies still a little shell-shocked about the environment and not yet willing to consider selling?”

Christopher M. Connor
“On your first point, you are absolutely correct. We want to keep the powder dry. We do think — we think we — and it goes to your second point; we think that eventually there might be some real nice assets here. We’re continuing to look at it but I don’t think the owners of these businesses has really changed. I think that we’ll see how they feel over the next six months and year, but we continue to push.”

Donald Carson – Merrill Lynch
“Okay, and what’s the backlog like on international acquisitions? Is there anymore progress there?”

Christopher M. Connor
“There’s some interesting properties out there right now. To Sean’s point, a little bit more activity there than domestically, given a more robust market and willingness to sell more of the — on an up trend. And we don’t comment much more beyond that in terms of what we are seeing or what we are doing.”

Look for Sherwin to now resume an active acquisition strategy that the lead paint specter has all but vanquished. They have weathered the housing storm to this point because of them and will come through this a far stronger compnay than when they went it.

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

↑ Grab this Headline Animator

Visit the ValuePlays Bookstore for Great Investing Books